Petition for Writ of Certiorari — Murphy v. Beck
Supreme Court brief2000
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Text
No. 99-
2000
OFFICE OF THE
GLean
Supreme Court of the United States
BRUCE G. MURPHY,
Petitioner,
JEFFREY H. BECK,
as Successor Agent for Southeast Bank, N.A.,
Respondent.
On Petition for Writ of Certiorari
to the United States Court of Appeals for the Eleventh Circuit
PETITION FOR WRIT OF CERTIORARI
JOHN F. BLOSS
CLARK BLOSS &
MCIVER,PLLC
Post Office Box 1349
Greensboro, NC 27402
(336) 275-7275
ERIK S. JAFFE
Counsel of Record
ERIK S. JAFFE, P.C.
5101 34” Street, N.W.
Washington, DC 20008
(202) 237-8165
THOMAS C. GOLDSTEIN
THOMAS C. GOLDSTEIN, P.C.
4607 Asbury Place, N.W.
Washington, DC 20016
(202) 237-7543
Counsel for Petitioner
QUESTION PRESENTED
The federal common-law D’Oench, Duhme doctrine, cre-
ated and expanded by D'Oench, Duhme & Co., Inc. v. FDIC,
~ 315 U.S. 447 (1942), and its progeny, generally provides fed-
eral banking insurers, receivers, and their successors-in-
interest added protections against unrecorded agreements that
might form the basis of a claim or defense relating to feder-
ally insured banks that have come under the control of federal
agents. There is a broad and well-recognized circuit split
over whether this federal common-law doctrine is viable in
light of this Court’s decisions in O'Melveny & Myers v.
FDIC, 512 U.S. 79 (1994), and Atherton v. FDIC, 519 U.S.
213 (1997).
The question presented in this case is:
Whether the federal common-law D’Oench, Duhme
doctrine constitutes a valid bar to petitioner’s claims?
il
PARTIES TO THE PROCEEDINGS BELOW
The plaintiff-appellant below, and petitioner in this court,
is Bruce G. Murphy.
The defendant-appellee in the Southern District of Florida
and in the Eleventh Circuit, and respondent in this Court, is
Jeffrey H. Beck, as Successor Agent for Southeast Bank, N.A.
In the District Court for the District of Columbia, the D.C.
Circuit, and the Southern District of Florida prior to the sub-
stitution of Beck, the defendant-appellee was the Federal De-
posit Insurance Corporation (“FDIC”), as receiver for South-
east Bank, N.A. The FDIC is no longer a party to this case
and is not a respondent in this Court.
ili
TABLE OF CONTENTS
Pages
ee OE Aincconsscnntnnnsnenicntnsmntenspmemnesiniininants i
PARTIES TO THE PROCEEDINGS BELOW ..................... ii
I it isnneninciiciniestaanisiiidieeiannmianetienenasiiinill ill
MI cl iv
PETITION FOR WRIT OF CERTIORARI .................00..0..... l
TL LATEST EOC ITE ]
| IE eee 2
STATUTORY PROVISIONS INVOLVED ......................008 2
gg 3
REASONS FOR GRANTING THE WRIT...................0.000008 7
1. THIS CASE PRESENTS A CONFLICT AMONG SIX
CIRCUITS OVER THE VITALITY OF THE D'OENCH,
ETT T RAEI TLT Nare een ER ETE ENTE x
I]. THE ELEVENTH CIRCUIT’S DECISION CONFLICTS
WITH THIS COURT’S DECISIONS IN O'MELVENY AND
I ines insite rineli deere etiam i)
III. THE QUESTION PRESENTED BY THIS CASE HAS
SUBSTANTIAL CONTINUING IMPORTANCE. .............0000 11
IV. THE JUDGMENT BELOW RESULTS IN THE NON-
UNIFORM APPLICATION OF FEDERAL LAW. ................. 16
IG ee Scaccecsaceccesercescenseccncnesncnsccnsunesscnssnnsssccssuseenenntese 17
iV
TABLE OF AUTHORITIES
Pages
Cases
AAI Recoveries, Inc. v. Pijuan, 13 F. Supp.2d 448
PIES Wo: CUPUUI ccssrtnensenstniutincinestidiinatiantitintinniiaidiniunnnmneiaiasies 13
Alaska Southern Partners v. Prosser, 972 P.2d 161
Dee cxsnseierncerretncnsinininisininciniicnanicasiiniiiiiemmmnsianenesi 15
Atherton v. FDIC, 519 U.S. 213 (1997) ........ccccceccesseeseeeees i, 10
Aurora Shores Homeowners Ass'n, Inc. v. FDIC, 2
F. Supp.2d 975 (N.D. Ohio 1998)..............ccccescesseesceeeeeenees 15
Beal Bank, SSB v. Pittorino, 177 F.3d 65 (CAI
Sina op unitaricenectcmnnaencinetimnnsientiiaadisieninsenanbiniindeimnseneimmemeniauet 13
Bolduc v. Beal Bank, SSB, 167 F.3d 667 (CAI
Sere cinsicccnninnsiineiininnaieneitanamenienmcetatinaienmmeititiondainieenateti 13
Booker v. Sarasota, Inc., 707 So.2d 886 (Fla. Ct.
Ss, SEs are aarinictesihieaiiiaiciietactaraidaainniittiniiniiaiaprsaiat 14
Coker v. Cramer Fin. Group, Inc., 992 S.W.2d 586
ee 14
D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S.
Rr Cai itcccnsinissisinsiamnonsnscnimisennsnndnigantisinimtedniniuaveaneneien i, 4
DiVall Insured Income Fund Ltd. Partnership v.
Boatmen’s First Nat'l Bank of Kansas City, 69
ees GP IEEY GPU cernsntinssantentnntennniamansseiieasiaiiiaininnmseinsei 8
Diversified Fin. Sys., Inc. v. Miner, 713 N.E.2d 293
i Cth GA, Ca cnesnenvierisntenemaritennctanentaniontinadentintnitiibiniaien 14
FDIC v. Deglau, 207 F.3d 153 (CA3 2000)..:............. 8, 13, 15
FDIC v. Frates, 44 F. Supp.2d 1176 (N.D. Okla.
ee 14
FDIC v. Houde, 90 F.3d 600 (CAI 1996) ..0.......ccccccccceccceeeeeees 8
Vv
FDIC v. Noel, 177 F.3d 911 (CA10 1999), cert.
denied, -- U.S. --, 120 S. Ct. 935 (2000).........ccccccceeceeenees
First Union Nat'l Bank of Florida v. Hall, 123 F.3d
1374 (CAI11 1997), cert. dismissed, 523 U.S.
BP Qe eraseencensscescrescscamsansennnsemssnsenanssnenenquvenscemnseneaness
In re Boone (Boone v. FDIC), 235 B.R. 828 (D.S.C.
SRI, CPU crnesessenscsnenesesnsmmsstonsemsseanensnmenemensemessmmnicenensens
Kessler v. National Enters., Inc., 165 F.3d 596
IY ieee anaa tiara aint etereesl 8,
Ledo Fin. Corp. v. Summers, 122 F.3d 825 (CA9
Milwaukee v. Illinois, 451 U.S. 304 (1981) .............cccccceeeeeeee
Motorcity of Jacksonville, Ltd. v. Southeast Bank
N.A., (“Motorcity I’), 83 F.3d 1317 (CA11 1996)
(en banc), vacated and remanded sub nom. Hess
v. FDIC, 519 U.S. 1087 (1997), reinstated, 120
F.3d 1140 (CA11 1997) (en banc), cert. denied
sub nom. Hess v. FDIC, 523 U.S. 1093 (1998)............... 6,7
Motorcity of Jacksonville, Ltd. v. Southeast Bank
N.A., (“Motorcity IT’), 120 F.3d 1140 (CA11
1997) (en banc), cert. denied, Hess v. FDIC, 523
Re BINED conszssnnsensensnsssesnenssemnemesssneenesmenscsansenscentd 6,7
Murphy v. FDIC, 208 F.3d 959 (CA11 2000)
eg EEE
Murphy v. FDIC, 61 F.3d 34 (CADC 1995)
FIG Punciaseremncnannenenmmatimnmnenamamemnmen
Murphy v. FDIC, 829 F. Supp. 3 (D.D.C. 1993),
PEPE, GE FFG DO GAS Bo pecccsccesccscssessscsscessssscessesseces
National Enters., Inc. v. Barnes, 201 F.3d 331 (CA4
National Enters., Inc. v. First Western Fin. Corp.,
166 F.3d 348, 1998 WL 852526 (CAI10 1998)
(unpub.) (table; text in Westlaw) ................:.ccccceceeeeeeeeeeees
vi
O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994) ... i, 4, 9, 10
OCI Mortg. Corp. v. Marchese, 745 A.2d 819
GEAUER. FED. GB, ZIRID ccccccccnscecssccsssecsenssensscssecszssnsacauissenese 14
Rankin v. Toberoff, 1998 WL 370305 (S.D.N.Y.
IND cnrnepennnmmeusscenmemneneneepeneeenmennnememnents 13
Remington Invs., Inc. v. Berg Prod. Design, Inc.,
172 F.3d 876, 1999 WL 132267 (CA9 1999)
(unpub.) (table; text in Westlaw) ..................ccccceeeeeeeeeeeeees 13
RTC Mortg. Trust 1994-S2 v. Shlens, 72 Cal.
Rptr.2d 581 (Cal. Ct. App. 2d Dist.), rev. denied
UIE ccesevennesnesnteressennenaneciigeienvantnnnannnmentinnmenmmmnnimenn 14
State Street Capital Corp. v. Gibson Tile, Inc., 1998
WL 907027 (N.D. Tex. 1998) (unpub.)..............00cccceeeees 13
UMLIC-Nine Corp. v. Lipan Springs Dev. Corp.,
168 F.3d 1173 (CA10), cert. denied, -- U.S. --,
| RR AE ESR I 14, 15
Young v. FDIC, 103 F.3d 1180 (CA4), cert. denied,
eR 9,14
Statutes
eel 2,5,9
EE enn TE: 2,4, 15
ERR ane ee ee a ee 2
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (“FIRREA”), Pub.L.
No. 101-73, 103 Stat. 183 (Aug. 9, 1989) 000... 2
Other Authorities
Brief for the FDIC in Opposition, Hess v. FDIC,
“No. 97-1025 (cert. denied, 523 U.S. 1093 (1998))......12, 14
Brief for the FDIC in Opposition, Noel v. FDIC,
No. 99-655 (cert. denied, -- U.S. --, 120 S. Ct.
| RE EOLA AL 1
Vii
Brief of the United States, Balar v. United States,
No. 98-1667 (cert. granted -- U.S. --, 120 S. Ct.
BED casesnsscnsensessenmeennseresensevsmenspemenenennessneentenesenss
Policy Statement Regarding Federal Common Law
and Statutory Provisions Protecting FDIC, as
Receiver or Corporate Liquidator, Against
Unrecorded Agreements or Arrangements of a
Depository Institution Prior to Receivership, 62
Fed. Reg. 5984 (1997) ......cccccsssssssssssssssesssssesssseeseeesee
Reply of Petitioner, Central Green Co. v. United
States, No. 99-859 (cert. granted -- U.S. --, 120
Be GR, BG GD crcnsccnscsssecsnssemsnsscsnnmensssemassnseenneess
IN THE
Supreme Court of the United States
BRUCE G. MURPHY,
Petitioner,
v.
JEFFREY H. BECK,
as Successor Agent for Southeast Bank, N.A..,
Respondent.
On Petition for Writ of Certiorari
to the United States Court of Appeals for the Eleventh Circuit
PETITION FOR WRIT OF CERTIORARI
Petitioner Bruce G. Murphy respectfully petitions for a
writ of certiorari to review the judgment of the United States
Court of Appeals for the Eleventh Circuit in this case.
_. OPINIONS BELOW
This case began in the-Distriet Court for the: District of
Columbia. It was appealed to the D.C. Circuit, remanded to
the district court, transferred to the Southern District of Flor- ~ -
ida, and eventually appealed to the Eleventh Circuit. This
Petition seeks review of the decision of the Eleventh Circuit.
The District Court for the District of Columbia’s opinion
and order granting summary judgment to then-defendant
FDIC is published as Murphy v. FDIC, 829 F. Supp. 3
(D.D.C. 1993), and is reproduced as Appendix B (pages B1-
2
B11). The D.C. Circuit’s decision reversing the district court
is published as Murphy v. FDIC, 61 F.3d 34 (CADC 1995)
(“Murphy I’), and is reproduced as Appendix C (pages Cl-
C14). On remand, the D.C. District Court transferred the case
to the Southern District of Florida. The transfer order is un-
published and is reproduced as Appendix D (pages D1-D2).
In May of 1998, Respondent Jeffrey H. Beck, as Successor
Agent for Southeast Bank, N.A. (“Southeast Bank”) was sub-
stituted as party defendant for the FDIC as receiver for South-
east Bank, N.A. The substitution order is unpublished and is
reproduced as Appendix E (page El). The District Court for
the Southern District of Florida’s opinion and order dismiss-
ing the complaint is unpublished and is reproduced as Appen-
dix F (pages F1-F6). The Eleventh Circuit’s decision affirm-
ing the district court is published as Murphy v. FDIC, 208
F.3d 959 (CA11 2000) (“Murphy IT’), and is reproduced as
Appendix A (pages Al-A18).
JURISDICTION
The Eleventh Circuit entered its judgment on April 7,
2000. Petitioner invokes this Court’s jurisdiction under 28
U.S.C. § 1254(1).
STATUTORY PROVISIONS INVOLVED
The federal common-law D’Oench, Duhme doctrine has
been partially codified by 12 U.S.C. § 1823(e), as amended,
and 12 U.S.C. § 1821(d)(9).! These provisions are repro-
duced as Appendix G (pages G1-G2) and Appendix H (page
H1), respectively.
' Section 1823(e) was amended by the Financial Institutions Reform, Re-
covery, and Enforcement Act of 1989 (“FIRREA”), Pub.L. No. 101-73,
103 Stat. 183 (Aug. 9, 1989).
3
STATEMENT OF THE CASE’
On August 18, 1989, petitioner Murphy invested over
$500,000 in Orchard Island Associates Limited Partnership
(“Orchard”) as part of a development project for a golf and
beach club in Florida. Over a period of several years extend-
ing before and after this investment, Southeast Bank lent Or-
chard approximately $50 million for the project. Throughout
this period Southeast Bank exercised extensive control and
direction over the project making Southeast Bank a de facto
joint venturer with Orchard. As a result of various wrongful
activities by Southeast Bank and Orchard, Orchard eventually
defaulted on its loans and Southeast Bank foreclosed on the
property. In 1991, Southeast Bank was declared insolvent
and placed into FDIC receivership.
In 1992, Murphy filed suit in the District Court for the
District of Columbia against the FDIC as receiver for South-
east Bank. The complaint alleged that Southeast Bank’s ac-
tions as a joint venturer with Orchid caused the loss of Mur-
phy’s investment. The complaint set forth claims for breach
of fiduciary duty, breach of contract, accounting deficiencies,
fraud, negligent misrepresentation and securities violations.
The FDIC moved to dismiss the complaint, arguing that
Murphy’s claims were barred by the federal common-law
D’Oench, Duhme doctrine. The D’Oench, Duhme doctrine
origina'ly only barred defenses to collection actions based
upon secret side-agreements that contradicted loan documents
or similar bank records concerning bank assets. Over time,
however, the doctrine has expanded into a bar against all
manner of claims or defenses against the FDIC or its succes-
sors that are based upon facts or agreements not memorialized
in a bank’s official records. In this case, the FDIC, as re-
* Unless otherwise noted, the facts are taken from the Eleventh Circuit’s
opinion, attached as Appendix A, which are in turn taken from the allega-
tions of petitioner’s complaint, which must be accepted as true given the
procedural posture of the case. App. A4.
4
ceiver for Southeast Bank, asserted that D ’Oench barred all of
Murphy’s claims because liability depended upon the joint
misdeeds of Southeast and Orchard, but there was no written
agreement in the Bank’s records memorializing their collu-
sive wrongdoing as a formal “joint venture.”
On August 10, 1993, the district court treated the FDIC’s
motion as one for summary judgment and granted summary
judgment on all counts. App. Bl. The district court ruled
that Murphy “cannot recover against Southeast on any theory
of an alleged unwritten joint venture agreement pursuant to
D’Oench, 315 U.S. 447 ... and 12 U.S.C. § 1823(e).” App.
B4; see also App. B8 (“To the extent that the Plaintiff at-
tempts to rely on an unwritten agreement to prove these secu-
rities violations claims, they are again barred by D‘Oench.”).
Murphy appealed.
On August 1, 1995, the D.C. Circuit, per Judge Ginsburg
for himself, Chief Judge Edwards, and then-Judge Wald, re-
versed. App. C2. The court held that § 1823(e) did not bar
Murphy’s claims and that this Court’s “decision in O'Melveny
& Myers v. FDIC, 512 U.S. 79 ... (1994), removes the federal
common law D’Oench doctrine as a separate bar to such
claims.” App. C2. As part of a detailed analysis of this
Court’s O'Melveny decision, the D.C. Circuit quoted
O’Melveny’s statement regarding the “‘extensive framework
of FIRREA”” that “‘[t]o create additional “federal common-
law” exceptions is not to “supplement” this scheme, but to
alter it.” App. C10.
The D.C. Circuit then applied the reasoning of O'Melveny
to the federal common-law D ’Oench doctrine thus:
[A]lthough the opinion for the Court does not specifi-
cally mention D’Oench, it does expressly include one of
the D’Oench-like statutory provisions (§ 1821(d)(9)) in
the list of special federal statutory rules of decision from
which it infers that “/i/nclusio unius, exclusio alterius.”
O'Melveny & Myers, 512 U.S. at --, 114 S.Ct. at 2054.
5
In so doing the Supreme Court, we think, necessarily
decided the D'Oench question. To translate: the inclu-
sion of § 1821(d)(9) in the FIRREA implies the exclu-
sion of overlapping federal common law defenses not
specifically mentioned in the statute — of which the
D’Oench doctrine is one.
App. C10-C11l. After disposing of various objections by the
FDIC, the D.C. Circuit concluded that “the need for a body of
federal common law under the rubric of D’Oench has now
‘disappeared’ and that the district court erred in holding that
Murphy’s claims are barred under D’Oench.” App. C13.
After remand, the district court transferred the case, sua
sponte and over Murphy’s objections, to the Southern District
of Florida. App. D1-D2.
On May 11, 1998, Jeffrey H. Beck, as Successor Agent
for Southeast Bank, was substituted for the FDIC as the party
defendant in the Southern District of Florida. App. E1.
On July 27, 1998, the Southern District of Florida granted
Beck’s motion to dismiss. App. F6. The district court held,
inter alia, that Murphy’s claims were barred by the D’Oench
doctrine. App. F5. Despite this issue having already been
decided in Murphy’s favor in the D.C. Circuit, the Southern
District of Florida reasoned that because the Eleventh Circuit,
in an intervening case, had specifically disagreed with the
D.C. Circuit’s decision in Murphy I, “the D’Oench doctrine
is still valid in this circuit ... [and] prevents Murphy from
Stating a valid claim.” App. F6. Murphy appealed.
On April 7, 2000, the Eleventh Circuit affirmed the dis-
trict court’s decision based exclusively on the D’Oench doc-
trine. App. AS.’ The Eleventh Circuit initially rejected Mur-
phy’s arguments that the D.C. Circuit’s earlier decision in the
* The court expressly declined to reach two other grounds given by the
district court for the dismissal. App. Al8 n. 8. Those other grounds,
while in petitioner’s view frivolous, would remain available on remand.
6
case should control based on either choice-of-law or law-of-
the-case principles. The court noted that
[w]e have had occasion recently to disagree with the
D.C. Circuit as to the continued viability of the
D’Oench, Duhme doctrine. ... In both Motorcity I and
Motorcity II [Motorcity of Jacksonville, Ltd. v. South-
east Bank N.A., (“Motorcity I’), 83 F.3d 1317 (CAI1
1996) (en banc), vacated and remanded sub nom. Hess
v. FDIC, 519 U.S. 1087 (1997), reinstated, Motorcity of
Jacksonville, Ltd. v. Southeast Bank N.A., (“Motorcity
IT’), 120 F.3d 1140 (CA11 1997) (en banc), cert. denied
sub nom. Hess v. FDIC, 523 U.S. 1093 (1998)], we ex-
pressly disagreed with the D.C. Circuit’s rejection of the
doctrine. See ... Motorcity II, 120 F.3d at 1141-44
(noting the circuit split between the D.C. and Eighth
Circuits, which have held that the FIRREA displaced the
D’Oench, Duhme doctrine, and the Fourth Circuit,
which has held that it did not, and holding that the fed-
eral common law doctrine was not preempted by the
FIRREA and remained good law in this Circuit).
App. A7-A8. Thus, notwithstanding that the issue had been
fully litigated in the D.C. district and circuit courts over a pe-
riod of several years, the Eleventh Circuit simply wiped the
slate clean and looked to its own contrary precedent regarding
the viability of the D’Oench doctrine.*
In light of that precedent, the Eleventh Circuit rejected
Murphy’s argument that the D’Oench doctrine was no longer
good law in light of FIRREA and this Court’s decisions in
O’Melveny and Atherton:
* The Eleventh Circuit also rejected Murphy’s argument that the D ’Oench,
Duhme doctrine was inapplicable where a receivership has generated a
substantial profit ($150 million) and hence the only persons (inequitably)
benefiting from application of the doctrine — and from Murphy’s loss —
were the Bank’s shareholders. App. A13-A14.
7
In Motorcity I and Motorcity II we ruled decisively
and en banc that the Supreme Court’s decisions in
O'Melveny and Atherton did not abrogate our prior
holdings regarding the continued viability of the
D’Oench, Duhme doctrine. We explained that both
O'Melveny and Atherton dealt with the question of
whether to create new federal common law in particular
areas rather than with the question of whether Congress
intended the FIRREA to supplant “the previously estab-
lished and long-standing federal common law D’Oench
doctrine.” Motorcity II, 120 F.3d at 1143; see also
Motorcity I, 83 F.3d at 1330. In Motorcity II, our af-
firmation of the D’Oench, Duhme doctrine in light of the
FIRREA and the Supreme Court’s decisions in
O'Melveny and Atherton was explicit ... [quoting Mo-
torcity IT, 120 F.3d at 1144].
App. Al6-Al7. The court concluded that “the D’Oench,
Duhme doctrine remains good law in this Circuit, and there is
no sound reason not to apply the doctrine in this case. Ac-
cordingly, we affirm the district court’s order dismissing
Murphy’s complaint.” App. A18 (footnote omitted).
This petition for certiorari followed.
REASONS FOR GRANTING THE WRIT
Certiorari should be granted because the Eleventh Cir-
cuit’s decision conflicts with the decision of the D.C. Circuit
in this very same case, as well as with decisions of the Third,
Eighth, and Ninth Circuits. The decision also conflicts with
this Court’s decisions in O’Melveny & Myers v. FDIC and
Atherton v. FDIC. The question presented raises an impor-
tant national issue affecting myriad persons and entities that
do business with financial institutions eventually placed under
the control of federal conservators or receivers. The diver-
gent results reached by federal courts — both between and
within cases — runs retrograde to the goal of uniform federal
_ law and undermines the fair administration of justice.
8
I. THIS CASE PRESENTS A CONFLICT AMONG SIX
CIRCUITS OVER THE VITALITY OF THE D’OENCH,
DUHME DOCTRINE.
This case presents the cleanest circuit split imaginable:
The decision of the Eleventh Circuit regarding the continued
availability of the D’'Oench, Duhme doctrine contradicts, and
expressly rejects, the decision of the D.C. Circuit on the pre-
cise same issue in an earlier stage of this very case. Compare
App. Al2 (“We have explicitly rejected, in both Motorcity /
and Motorcity II, the D.C. Circuit’s prior ruling regarding the
preemption of the D’Oench, Duhme doctrine.”) with App.
C13 (“the district court erred in holding that Murphy’s claims
are barred under D’Oench’”’).
Several other circuits also are divided on this issue. Sid-
ing with the D.C. Circuit are the Third, Eighth, and Ninth
Circuits. See FDIC v. Deglau, 207 F.3d 153, 171 (CA3 2000)
(“We agree with the Eighth, Ninth and D.C. Circuits that
D’Oench is not applicable federal common law in light of ©
O'Melveny and Atherton.”); DiVall Insured Income Fund Ltd.
Partnership v. Boatmen’s First Nat'l Bank of Kansas City, 69
F.3d 1398, 1402 (CA8 1995) (following Murphy I's reasoning
and holding that the D’Oench doctrine has been preempted);
Ledo Fin. Corp. v. Summers, 122 F.3d 825, 828-29 (CA9
1997) (holding, in light of O'Melveny and Atherton, that
D’Oench no longer applies, at a minimum, to the FDIC-as-
receiver); see also Kessler v. National Enters., Inc., 165 F.3d
596, 598 (CA8 1999) (post-Atherton rejection of D'Oench,
citing Divall); cf. FDIC v. Houde, 90 F.3d 600, 605 n. 5 (CAI
1996) (“A circuit split has arisen as to whether the [D ‘Oench]
doctrine is still valid after O'Melveny & Myers, supra. Com-
pare [DiVall and Murphy I with Motorcity | (CA11)}. This
court has not yet expressed an opinion as to the effect of
O'Melveny & Myers on the doctrine.”).
Siding with the Eleventh Circuit in favor of a ccntinuing
D’Oench doctrine is the Fourth Circuit. Young v. FDIC, 103
9
F.3d 1180, 1187 (CA4) (“Section 1823(e) does not, however,
preempt the D’Oench doctrine.” (citing Motorcity /)), cert.
denied, 522 U.S. 928 (1997); see also National Enters., Inc.
v. Barnes, 201 F.3d 331, 333 & n. 4 (CA4 2000) (post-
Atherton confirmation of D 'Oench, citing Young).
This broad split has persisted for years, both sides have
recognized the conflict, the Eleventh Circuit has held fast
even after a GVR by this Court, and there is no credible pos-
sibility that the split will resolve absent the direct intervention
of this Court. Certiorari should therefore be granted.
Il. THe ELEVENTH CIRCUIT’S DECISION CONFLICTS
WITH THIS COURT’S DECISIONS IN O’MELVENY AND
ATHERTON.
In addition to conflicting with the decisions of four other
circuits, the Eleventh Circuit’s decision conflicts with the de-
cisions of this Court. In O'Melveny & Myers, this Court
unanimously rejected the FDIC’s attempt to rely upon federal
common law to bar an affirmative defense to a negligence and
breach-of-fiduciary-duty suit it brought as receiver for a failed
bank. 512 U.S. at 83. This Court held that not only was there
no general federal common law, but also that “those provi-
sions of FIRREA which specifically create special federal
rules of decision regarding claims by, and defenses against,
the FDIC as receiver,” including, specifically and notably,
§ 1821(d9), “demolished” the argument that FIRREA dem-
onstratec 2 “high federal interest” sufficient to justify use of
federal common law. 512 U.S. at 86. The rights expressly
granted to the FDIC-as-receiver, this Court ruled, can be nei-
ther “supplemented [nor] modified by federal common law....
Inclusio unius, exclusio alterius.” Id. Referring to the “ex-
tensive framework of FIRREA,” this Court stated that “[t]o
create additional ‘federal common-law’ exceptions is not to
‘supplement’ this scheme, but to alter it.” /d. at 87. While
not addressing D’'Oench by name, the use of § 1821(d)(9) as
the basis for its application of the “inclusio unius, exclusio
10
alterius” principle more than covers that ground.* The deci-
sion in O'Melveny, fairly read, thus requires a contrary deci-
sion to that reached by the Eleventh Circuit in this case.
Two years after O'Melveny, this Court decided Atherton,
which confirms that the federal common-law D’Oench doc-
trine is not viable. In Atherton, this Court held that only fed-
eral statutory requirements and compatible state law set the
standard of care for officers and directors of a federally char-
tered savings association in a suit by federal receivers. 519
U.S. at 216. Among the many points of interest in Atherton,
the Court held that even if there were no federal statute di-
rectly addressing the issue, federal common law did not pro-
vide the standard of care. /d. at 217-18. In disposing of vari-
ous arguments proffered by the FDIC in favor of a federal
common-law rule, the Court also noted the limited federal
interest at-stake when “the FDIC is acting only as receiver of
a failed institution; it is not pursuing the interest of the Fed-
eral Government as a bank insurer.” /d. at 225. Finally, and
of particular importance given the Eleventh Circuit’s claim
that O'Melveny and Atherton only apply to the creation of
“new” federal common law rather than to the existence of
“old” federal common law, App. A1l6-17, the Court in Ather-
ton characterized the rule it rejected as being “a pre-existing
judge-made federal common-law standard.” id. Indeed, the
Court recognized that federal courts had been applying and
interpreting the asserted federal common-law standard for
over 100 years, id. at 220, yet did not hesitate in repudiating
the validity of that standard.°
* And, as the D.C. Circuit has noted in Murphy /, this “Court was specifi-
cally advised by both sides on brief and at oral argument that resolution of
the issue before it could also affect the D'Oench doctrine.” App. C10.
* Furthermore, while O'Melveny itself may have been addressed to a
“new” rule, the cases relied upon by O'Melveny, 512 U.S. at 85, addressed
“old” rules also. Thus, in Milwaukee v. Illinois, this Court stated that
“when Congress addresses a question previously governed by a decision
rested on federal common law the need for such an unusual exercise of
11
Because the Eleventh Circuit’s decision is at odds with
O'Melveny and Atherton, this Court should grant certiorari in
order to return the Eleventh Circuit to the correct legal path.
Ill. THE QUESTION PRESENTED BY THIS CASE HAS
SUBSTANTIAL CONTINUING IMPORTANCE.
The D’Oench, Duhme doctrine is the subject of extensive
litigation and continues to arise in a variety of contexts, as the
circuit split itself indicates. Thus, from the date of the
O'Melveny decision in 1994 through the present — a period
graced with a healthy national banking system and relatively
few bank failures - D’Oench has been cited in over 300
opinions, according to a search on Westlaw.’ These cases
will continue to arise and will continue to result in the incon-
sistent administration of justice due to the circuit split.
This Court has previously passed on the opportunity to re-
solve this circuit conflict, perhaps in the hope that the issue
would resolve itself based upon Atherton, or perhaps in reli-
ance upon the FDIC’s claim that cases involving D’Oench
were of limited continuing significance. See Br. for the FDIC
in Opp. at 6-7, Noel v. FDIC, No. 99-655 (cert. denied, --
U.S. --, 120 S. Ct. 935 (2000)) (claiming that the FDIC will
assert D’Oench only as to transactions preceding the August
9, 1989, enactment of FIRREA and that such transactions are
of limited and declining importance); Br. for the FDIC in
Opp. at 10, Hess v. FDIC, No. 97-1025 (cert. denied, 523
law-making by federal courts disappears.... [The Court’s] commitment to
the separation of powers is too fundamental to continue to rely on federal
common law ... when Congress has addressed the problem.” 451 U.S. 304,
314-15 (1981) (emphasis added).
” And while not every case involves a direct application of D’Oench, the
vast majority do, and the others demonstrate the broad secondary effects
of this federal common-law doctrine.
12
U.S. 1093 (1998)) (same).* But these past denials of certio-
rari do not undermine the basis for granting certiorari in this
case because the issue has not resolved itself and because the
FDIC’s claim of limited significance was based upon false
assumptions. Of particular importance, the FDIC failed to
acknowledge that its policy regarding the assertion of the
D’Oench doctrine cannot and does not bind the many succes-
sors to the FDIC, such as respondent in this case. Therefore,
certiorari should be granted because the conflict among the
circuits persists and remains of continuing importance. Cf.
Br. of the United States, Balar v. United States, No. 98-1667,
at 14 n. 3 (asserting that certiorari should be granted, despite
recent denial of certiorari on same question, because the filing
of a further petition demonstrated the continuing significance
of the question presented) (cert. granted -- U.S. --, 120 S. Ct.
10 (1999)); Reply of Pet., Central Green Co. v. United States,
No. 99-859, at 8-9 & n. 3 (same) (cert. granted -- U.S. --, 120
S. Ct. 1416 (2000)).
With all due respect to the FDIC’s assertions regarding
the limited impeztance of this issue, the circuit split over
D’Oench remains significant as to both pre- and post-
FIRREA facts. Indeed, in the over three years since the FDIC
issued its Policy Statement claiming to forego the invocation
of D’Oench as to post-FIRREA facts,’ the issue still has
arisen frequently and has continued to vex the courts.
First, the FDIC is not the only party that asserts D’Oench
as a defense. Numerous private successors-in-interest to fed-
eral receivers continue to assert the doctrine without regard to
* Although the FDIC is no longer a party to this case, we are serving a
courtesy copy of this petition on the Solicitor General, and granting con-
sent for him to file an amicus brief for the FDIC should he see fit.
* Policy Statement Regarding Federal Common Law and Statutory Provi-
sions Protecting FDIC, as Receiver or Corporate Liquidator, Against Un-
recorded Agreements or Arrangements of a Depository Institution Prior to
Receivership, 62 Fed. Reg. 5984 (1997).
13
whether the transactions pre-date or post-date FIRREA. This
case is a perfect example. See also, e.g., Beal Bank, SSB v.
Pittorino, 177 F.3d 65, 67-68 (CA1 1999) (private successor-
in-interest to FDIC-as-receiver asserting D 'Oench as to post-
FIRREA facts); Bolduc v. Beal Bank, SSB, 167 F.3d 667, 673
(CAI 1999) (private successor-in-interest to FDIC-as-receiver
invoking D’Oench as to post-FIRREA facts); National En-
ters., Inc. v. First Western Fin. Corp., 166 F.3d 348, 1998
WL 852526, *1-3 (CAI10 1998) (unpub.) (table; text in
Westlaw) (private successor-in-interest to RTC-as-receiver
asserting D’Oench as to both pre- and post-FIRREA facts);
4 Recoveries, Inc. v. Pijuan, 13 F. Supp.2d 448, 450-51
(S.D.N.Y. 1998) (successor-in-interest to FDIC-as-receiver
asserting D 'Oench regarding post-FIRREA facts); State Street
Capital Corp. v. Gibson Tile, Inc., 1998 WL 907027 (N.D.
Tex. 1998) (unpub.) (successor-in-interest to RTC-as-receiver
asserting D‘Oench as to post-FIRREA facts); cf. Remington
Invs., Inc. v. Berg Prod. Design, Inc., 172 F.3d 876, 1999 WL
132267, *1 (CA9 1999) (unpub.) (table; text in Westlaw)
(lease guarantor asserting D’Oench against successor-in-
interest to FDIC-as-receiver as to undated facts); First Union
Nat'l Bank of Fla. v. Hall, 123 F.3d 1374, 1376 (CA11 1997)
(private successor-in-interest to FDIC-as-receiver asserting
D'Oench as to facts of unspecified date), cert. dismissed, 523
U.S. 1135 (1998); Rankin v. Toberoff, 1998 WL 370305, *5
(S.D.N.Y. 1998) (unpub.) (successor-in-interest to FDIC- —
corporate invoking D’Oench as to pre- and post-FIRREA
facts). Such successors-in-interest to the FDIC — including
purchasers of assets from the FDIC and successor agents such
as the respondent in this case — will undoubtedly continue to
assert D’Oench as long as it remains available, regardless of
any internal FDIC policies.
Second, both the FDIC and various private parties regu-
larly continue to invoke or to defend D’Oench as to pre-
FIRREA facts. See, e.g., Deglau, 207 F.3d at 159 n. 2, 171
(CA3 2000) (FDIC-as-receiver and/or private successor-in-
14
interest asserted D’Oench as to pre-FIRREA facts); Barnes,
201 F.3d at 332-33 (CA4 2000) (private successor-in-interest
to RTC-as-conservator asserting D’Oench regarding pre-
FIRREA facts); FDIC v. Noel, 177 F.3d 911, 917-18 (CA10
1999) (applying D’Oench to pre-1989 facts), cert. denied, --
U.S. --, 120 S. Ct. 935 (2000); UMLIC-Nine Corp. v. Lipan
Springs Dev. Corp., 168 F.3d 1173, 1179 (CA10) (private
successor-in-interest to RTC-as-receiver invoking D’Oench
as to pre-FIRREA facts), cert. denied, -- U.S. --, 120 S. Ct.
499 (1999); Kessler, 165 F.3d at 598 (CA8 1999) (private
successor-in-interest to RTC-as-receiver invoking D’Oench
as to pre-FIRREA agreements); Young v. FDIC, 103 F.3d at
1187-89 (CA4 1997) (FDIC asserting D’Oench as to pre-
FIRREA facts); FDIC v. Frates, 44 F. Supp.2d 1176, 1220-21
(N.D. Okla. 1999) (FDIC asserting D’Oench as to pre-
FIRREA facts); OCI Mortg. Corp. v. Marchese, 745 A.2d
819, 821-22 (Conn. App. Ct. 2000) (successor-in-interest to
RTC-as-receiver asserting D’Oench as to pre-FIRREA facts);
Diversified Fin. Sys., Inc. v. Miner, 713 N.E.2d 293, 299 (Ind.
Ct. App. 1999) (successor in interest to FDIC-as-receiver in-
voking D’Oench and as to pre-FIRREA facts); Coker v. Cra-
mer Fin. Group, Inc., 992 S.W.2d 586, 590 (Tex. App.-
Texarkana 1999) (successor-in-interest to FDIC-as-receiver
invoking D’Oench as to pre-FIRREA facts); RTC Morig.
Trust 1994-S2 v. Shlens, 72 Cal. Rptr.2d 581, 592 (Cal. Ct.
App. 2d Dist.), rev. denied (1998) (successor-in-interest to
RTC-as-receiver invoking D’Oench as to pre-FIRREA facts);
Booker v. Sarasota, Inc., 707 So.2d 886, 887-88 (Fla. Ct.
App. Ist Dist. 1998) (successor-in-interest to RTC/FDIC-as-
receiver invoking D’Oench as to facts of uncertain, but likely
pre-FIRREA, date); see also Br. for the FDIC in Opp. at 8,
Hess v. FDIC, No. 97-1025 (cert. denied, 523 U.S. 1093
(1998)) (“Agreements made before [the enactment of
FIRREA] ... are subject to pre-FIRREA law, including the
15
federai common law then well established under
D’Oench.”).'°
Third, the FDIC has never conceded that FIRREA dis-
places D’Oench even as to post-FIRREA agreements. Its
Policy Statement supposedly eschewing D’Oench in such
contexts is just that — a policy statement, not a regulation —
and thus, for all practical purposes, is legally meaningless.
And there is at least some reason to doubt that the FDIC
abides by that policy in any consistent fashion. See, e.g., In
re Boone (Boone v. FDIC), 235 B.R. 828, 834-35 (D.S.C.
Bankr. 1998) (FDIC apparently asserting D 'Oench as defense
regarding post-1989 facts).'!
Because courts continue to address numerous assertions
of the D’Oench doctrine as to both pre- and post-FIRREA
'° Contrary to the FDIC’s earlier claims, such cases are quite numerous
and will continue to arise for many years to come. Given the long statute
of limitations — six years — and the government’s habit of appointing suc-
cessive federal receiverships, there are likely numerous cases involving
pre-1989 facts that have yet to be brought, much less that have resulted in
a decision. Cf UMLIC-Nine Corp., 168 F.3d at 1179 & n. 5 (CA10 1999)
(1986 Note, 1988 default, 1988 Receivership and transfer of assets, 1991
receivership of transferee, creation of dummy institution, transfer of assets
and appointment of conservator for transferee, 1992 appointment of re-
ceiver for transferee, 1995 transfer of Note to private party; statute of
limitations on 1988 default thus runs at least to 1997 — six years after ap-
pointment of the penultimate receiver, and maybe longer).
'' Casting further doubt on the significance of the FDIC’s February 1997
Policy Statement is the fact that the FDIC apparently continues to assert
defenses based on amended § 1823(e) in cases involving pre-FIRREA
transactions. See Deglau, 207 F.3d at 159 n. 2, 170-71 (CA3 2000) (ap-
plying § 1823(e) in favor of FDIC-as-receiver and its eventual successor-
in-interest in case involving pre-FIRREA facts); Aurora Shores Home-
owners Ass'n, Inc. v. FDIC, 2 F. Supp.24 975, 977-79 (N.D. Ohio 1998)
(FDIC-as-receiver invoking § 1823(e) as to pre-1989 facts); cf. Alaska
Southern Partners v. Prosser, $72 P.2d 161, 164-65 (Alaska 1999) (suc-
cessor-in-interest to FDIC-as-receiver invoking § 1823(e) as to pre-
FIRREA facts).
16
facts, the issue continues to be of national significance and in
great need of this Court’s attention.
IV. THE JUDGMENT BELOW RESULTS IN THE NON-
UNIFORM APPLICATION OF FEDERAL LAW.
In addition to the pressing general need to resolve a con-
tinuing and expanding split, this case itself presents a com-
pelling vehicle in which to address the question presented.
As an initial matter, the fact that the same plaintiff, on identi-
cal facts, both won and then lost on appeal in two different
federal courts on the same question of law in the same case
highlights the confusion among the circuits and the need for a
uniform law on this subject. It also highlights the danger of
forum shopping — primarily to avoid those circuits in which
the D’Oench doctrine has been rejected — and the danger that
inconsistent results will occur due solely to choice of forum.
Second, the procedural conduct of this case clouds the
credibility of the federal courts insofar as it appears that a
successful plaintiff was deprived of his efforts by the ma-
nipulations of the government and the judiciary. Thus, with-
out purporting to know the mind of the district judge, it cer-
tainly has a questionable appearance when a judge who has
just been reversed transfers a case, sua sponte, to a circuit in
which the law is more hospitable to his original opinion. This
appearance is exacerbated by the fact that the transfer was for
the purported reason of the convenience of the parties and
witnesses and the better application of state law, but upon
reaching the transferee circuit, the case was fully (and pre-
dictably) resolved based on controlling federal precedent on a
motion to dismiss. The entire predicate for the transfer thus
proved utterly hollow and the only consequence was that the
transferee district’s original views were effectively reinstated
in a more favorable forum as a result of the transfer.
Third, the entire notion of having a transferee court apply
its own law is predicated upon the supposed uniformity of
17
federal law. But such uniformity can come only from this
Court in cases where the transferee and the transferor eourt
themselves split on a dispositive quesiion of law. In order to
make any sense of this federal choice of law rule, this Court
needs to impose the presumed uniformity in cases such as this
one. Otherwise, the justifications offered by the Eleventh
Circuit for applying its own law to the transferred case are
just empty platitudes. The need for Supreme Court-imposed
uniformity is even greater given the Eleventh Circuit’s refusal
to apply the law-of-the-case doctrine on the sole ground that it
disagreed with its sister circuit and hence refused to defer to
its ruling despite the parties already having fully litigated the
issue between them.
CONCLUSION
For the foregoing reasons, this Court should grant the Pe-
tition for Writ of Certiorari.
Respectfully submitted,
JOHN F. BLoss ERIK S. JAFFE
CLARK BLOsS & Counsel of record
McIver, PLLC ERIK S. JAFFE, P.C.
Post Office Box 1349 5101 34” Street, N.W.
Greensboro, NC 27402 Washington, DC 20008
(336) 275-7275 (202) 237-8165
THOMAS C. GOLDSTEIN
THOMAS C. GOLDSTEIN, P.C.
4607 Asbury Place, N.W.
Washington, DC 20016
(202) 237-7543
Counsel for Petitioner
Dated: July 5, 2000.
APPENDICES
SAE AR cae WRT Ae a
App. Al
APPENDIX A
208 F.3d 959
Bruce G. MURPHY, Plaintiff-Appellant,
v.
FEDERAL DEPOSIT INSURANCE
CORPORATION, as receiver for Southeast Bank, N.A.;
Jeffrey H. Beck, Defendants-Appellees.
No. 98-5292.
United States Court of Appeals,
Eleventh Circuit.
April 7, 2000.
John F. Bloss, Clark & Wharton, Greensboro, NC, for
Plaintiff- Appellant.
Elliot H. Scherker, Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., Miami, FL, for Defen-
dants-Appellees.
Appeal from the United States District Court for the
Southern District of Florida.
Before BIRCH and MARCUS, Circuit Judges, and
ALAIMO , Senior District Judge.
MARCUS, Circuit Judge:
Plaintiff-Appellant Bruce G. Murphy (“Murphy”) appeals
the district court’s order dismissing his amended complaint
against Defendant Jeffrey Beck, as Successor Agent for the
Federal Deposit Insurance Company, (“FDIC”). Among
other things, the district court held that Murphy’s claims
* Honorable Anthony A. Alaimo, Senior U.S. District Judge for the South-
ern District of Georgia, sitting by designation.
App. A2
against the FDIC were barred by the federal common law
D’Oench, Duhme doctrine first expounded by the Supreme
Court in D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447,
62 S. Ct. 676, 86 L. Ed. 956 (1942). Because acceptance of
the D’Oench, Duhme doctrine is well-settled in this Circuit,
and because we can discern no sound reason for not applying
the doctrine in this case, we affirm the district court’s order
dismissing Murphy’s complaint.
L.
The facts underlying this case are straightforward, but the
procedural history of the case is both unusual and important.
In June 1989, Murphy received a letter from Robert H.
Haines, III, a general partner in Orchid Island Associates
Limited Partnership (“Orchid”), soliciting Murphy’s invest-
ment in Orchid’s development of the Orchid Island Golf and
Beach Club Project (the “Project”) located in Indian County,
Florida. The letter projected a 6.1 multiple return on invest-
ments. Soon thereafter, on August 18, 1989, Murphy in-
vested $515,672.37 in a limited partnership interest in Orchid.
Southeast Bank provided several loans for the Project
from the fall of 1988 until the beginning of 1991. These
loans totaled approximately $50 million. Orchid eventually
defaulted on its loans and Southeast foreclosed on the prop-
erty. Southeast itself was declared insolvent on September
19, 1991 and placed in FDIC receivership.
On August 20, 1992, Murphy filed suit in the United
States District Court for the District of Columbia against the
FDIC, as receiver for Southeast, alleging that Southeast as-
serted extensive control over the Project and that Southeast
knew about and participated in the fraudulent activities of Or-
chid’s principals. According to the complaint, Murphy was
induced to invest by a solicitation letter from Orchid which
falsely represented that projections by Arthur Anderson &
Co. reflected a “6.1 multiple return on [ ][his! investment.”
Murphy claimed that Southeast acted in concert with Orchid
App. A3
in making decisions pertaining to the Orchid development,
and that these decisions were separate and apart from South-
east’s role as a mere lender to Orchid. Murphy added that
Southeast’s actions as a joint venturer with Orchid in the
Project caused the loss of his financial investment. Accord-
ingly, Murphy sued for breach of fiduciary duty, breach of
contract, accounting deficiencies, fraud, negligent misrepre-
sentation and securities violations.
The FDIC moved to dismiss the complaint on the grounds
that Murphy’s claims were barred by the federal common law
doctrine of D’Oench, Duhme. On August 10, 1993, the dis-
trict court, treating the FDIC’s motion as a motion for sum-
mary judgment, granted summary judgment on all counts.
The district court ruled that under the D’Oench, Duhme doc-
trine, Murphy could not assert a claim against the FDIC based
on the theory that Southeast was a joint venturer with Orchid
in the Project because there was no written joint venture
agreement between the two. Murphy v. FDIC, 829 F. Supp.
3, 5-6 (D.D.C. 1993). In fact, the written agreements between
the bank and Orchid denied such a relationship. Jd. On ap-
peal, the Court of Appeals for the D.C. Circuit reversed the
district court’s decision on all but two counts,' holding that
the D’Oench, Duhme doctrine had been preempted by the Fi-
nancial Institutions Reform, Recovery, and Enhancement Act
' The Circuit Court affirmed the district court’s grant of summary judg-
ment in favor of the FDIC on Murphy’s two procedural claims seeking 1)
a declaratory judgment that the FDIC is required by statute to establish an
ADR procedure, and 2) a writ of mandamus compelling that result. As for
the first claim, the court held that although the Financial Institutions Re-
form, Recovery, and Enhancement Act of 1989 (FIRREA) did not seem to
require the FDIC to establish an ADR process, the FDIC appeared to have
initiated such a program and therefore Murphy’s request for the court to
order the FDIC to do so was moot. As for the second claim, the court held
that the FIRREA gave the FDIC discretion to decide whether to refer any
particular case to ADR and therefore Murphy was not entitled to an order
os the FDIC to direct his case to ADR. Murphy, 61 F.3d at 40-
App. A4
of 1989 (FIRREA) and did not, therefore, bar Murphy’s
claims. See Murphy v. FDIC, 61 F.3d 34, 39 (D.C. Cir. 1995)
(concluding that “the inclusion of § 1821(d)(9) in the
FIRREA implies the exclusion of overlapping federal com-
mon law defenses not specifically mentioned in the statute -
of which the D 'Oench doctrine is one”’).
After remand to the district court, the FDIC again moved
to dismiss the complaint for failure to state a claim. Without
ruling on the motion, the district court transferred the case to
the Southern District of Florida, concluding that the Southern
District of Florida was a more convenient location for the
case because the Plaintiff and the majority of witnesses re-
sided in the district and both the Project and Southeast Bank
had been located there. The district court for the Southern
District of Florida substituted Jeffrey H. Beck as successor
agent for the FDIC and, thereafter, granted the FDIC’s Mo-
tion to Dismiss. The district court offered three alternative
grounds for its decision: first, loan agreements between Or-
chid and Southeast disclaiming the existence of a joint ven-
ture barred Murphy, as a limited partner in Orchid and there-
fore a party to the agreements, from asserting such a joint
venture; second, even if Murphy were not a party to the
agreements, he failed to prove the existence of a joint venture
relationship between Orchid and Southeast; and finally, the
federal common law D’Oench, Duhme doctrine barred Mur-
phy’s claim.
Il.
We review a district court’s order granting a motion to
dismiss for failure to state a claim de novo. Beck v. Deloitte
& Touche, 144 F.3d 732, 736 (11th Cir. 1998); McKusick v.
City of Melbourne, 96 F.3d 478, 482 (11th Cir. 1996). When
considering a motion to dismiss for failure to state a claim, a
court must accept the allegations in the complaint as true,
construing them in the light most favorable to the plaintiff.
Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir. 1999).
App. A5
On appeal, we need only consider the district court’s third
reason for dismissal. Plainly, the D’Oench, Duhme doctrine
was intended “to protect [the FDIC] and the public funds
which it administers against misrepresentations as to the secu-
rities or other assets [and liabilities] in the portfolios of the
banks which [the FDIC] insures.” D’Oench, Duhme, 315
U.S. at 457, 62 S. Ct. at 679, 86 L. Ed. 956. The doctrine
originated more than half-a-century ago in the case of
D’Oench, Duhme & Co., Inc. v. FDIC where a securities
dealer who executed a demand note with a bank tried to pre-
vent the FDIC, which had acquired the note, from enforcing it
because of the dealer’s separate agreement with the bank that
the note would not be called for payment. The Supreme
Court rejected the defense and squarely held that a secret
agreement not on the bank’s records could not operate as a
defense against the FDIC’s suit. /d. at 459, 62 S. Ct. at 680.”
The Eleventh Circuit has described the scope of the
> Eight years later, Congress partially codified the holding of D’Oench,
Duhme, as section 2(13)(e) of the Federal Deposit Insurance Act of 1950,
12 U.S.C. § 1823(e)(1). This provision, as modified by the Financial In-
stitutions Reform, Recovery, and Enforcement Act, Pub.L. No. 101-73,
currently provides:
No agreement which tends to diminish or defeat the interest of
the Corporation [FDIC] in any asset acquired by it under this sec-
tion or section 1821 of this title, either as security for a loan or by
purchase or as receiver of any insured depository institution, shall
be valid against the Corporation unless such agreement--
(A) is in writing,
(B) was executed by the depository institution and any person
claiming an adverse interest thereunder, including the obligor, con-
temporaneously with the acquisition of the asset by the depository
(C) was approved by the board of directors of the depository in-
stitution or its loan committee, which approval shall be reflected in
the minutes of said board or committee, and
(D) has been, continuously, from the time of its execution, an of-
ficial record of the depository institution.
App. A6
D’Oench, Duhme doctrine in these terms:
In a suit over the enforcement of an agreement originally
executed between an insured depository institution and a
private party, a private party may not enforce against a
federal deposit insurer any obligation not specifically
memorialized in a written document such that the
agency would be aware of the obligation when con-
ducting an examination of the institution’s records.
Baumann v. Savers Federai Sav. and Loan Ass'n, 934 F.2d
1506, 1515 (11th Cir. 1991). See also Motorcity of Jackson-
ville, Ltd. v. Southeast Bank N.A., (“Motorcity I’), 83 F.3d
1317, 1326 (11th Cir. 1996) (en banc), vacated and remanded
by Hess v. FDIC, 519 U.S. 1087, 117 S. Ct. 760, 136 L.Ed.2d
708 (1997), reinstated by Motorcity of Jacksonville, Ltd. v.
Southeast Bank N.A., (“Motorcity IT’), 120 F.3d 1140 (11th
Cir. 1997), (en banc), cert. denied, Hess v. FDIC, 523 U.S.
1093, 118 S. Ct. 1559, 140 L.Ed.2d 791 (1998).> We have
held that the doctrine “‘applies in virtually all cases where a
federal depository institution regulatory agency is confronted
with an agreement not documented in the institution’s rec-
ords.”” OPS Shopping Ctr., Inc. v. FDIC, 992 F.2d 306, 308
(11th Cir. 1993) (quoting Baumann, 934 F.2d at 1510). We
have also made clear that the doctrine applies when the FDIC
is acting as.a receiver. See FSLIC v. Two Rivers Assocs., Inc.,
880 F.2d 1267, 1274, 1276-77 (11th Cir. 1989) (holding that
the federal common law D'Oench, Duhme doctrine protects
the FSLIC and the FDIC in both receiver and corporate ca-
pacities); Timberland Design, Inc. v. First Serv. Bank for
Sav., 932 F.2d 46, 49 (ist Cir. 1991) (per curiam) (citing
—_--
- —_- =
> The Supreme Court granted certiorari on Motorcity |, vacated our judg-
ment, and remanded the case for further consideration in light of its deci-
sion in Atherton v. FDIC, 519 U.S. 213, 117 S. Ct. 666, 136 L.Ed.2d 656
(1997). In Motorcity II, after considering the Supreme Court’s decision in
Atherton, we reaffirmed our previous holding in Motorcity | and reinstated
that opinion.
App. A7
cases for the proposition that “courts have consistently ap-
plied the [D’Oench, Duhme] doctrine to those situations
where the FDIC was acting in its capacity as receiver”).
Because no written agreement exists between Southeast
and Orchid, if the D’Oench, Duhme doctrine applies in this
case, it bars Murphy’s claims against the FDIC which are
based on his allegations that Orchid and Southeast were act-
ing as joint venturers. Murphy argues, however, that there are
four independent reasons why the D’Oench, Duhme doctrine
should not be applied in this case: first, the choice of law
doctrine requires application of D.C. Circuit law rather than
Eleventh Circuit law; second, the D.C. Circuit’s decision that
the D’Oench, Duhme doctrine has been preempted by the
FIRREA should be accepted as law of the case; third, the
doctrine should not be applied to cases in which the receiver-
ship has generated a surplus; and finally, the doctrine is no
longer valid in light of recent Supreme Court rulings. We are
not persuaded by any of these arguments and address each in
turn. .
A.
We have had occasion recently to disagree with the D.C.
Circuit as to the continued viability of the D’Oench, Duhme
doctrine. In its consideration of this case before transfer, the
D.C. Circuit held that the doctrine had been preempted by the
FIRREA, and therefore could not bar Murphy’s claims. Mur-
phy v. FDIC, 61 F.3d at 38. According to the D.C. Circuit,
“the Supreme Court ... necessarily decided the D’Oench
question.... [T]he inclusion of § 1821(d)(9) in the FIRREA
implies the exclusion of overlapping federal common law de-
fenses not specifically mentioned in the statute — of which the
D'’Oench doctrine is one.” Jd. at 39. In both Motorcity | and
Mojorcity II, we expressly disagreed with the D.C. Circuit’s
rejection of the doctrine. See Motorcity I, 83 F.3d at 1327
(noting that “[iJn Murphy v. FDIC, 61 F.3d 34 (D.C. Cir.
1995), the D.C. Circuit recently held that the Supreme Court’s
reasoning in O'Melveny & Myers v. FDIC, 512 U.S. 79, 114
App. A&
S. Ct. 2048, 129 L. Ed.2d 67 (1994), leads ‘ineluctably’ to the
conclusion that the common law D’Oench doctrine has been
preempted. /d. at 38.... We disagree ... and hold that the fed-
eral common law D'Oench doctrine has not been preempted
by statute” (internal citations omitted)); Motorcity Il, 120
F.3d at 1141-44 (noting the circuit split between the D.C. and
Eighth Circuits, which have held that the FIRREA displaced
the D’Oench, Duhme doctrine, and the Fourth Circuit, which
has held that it did not, and holding that the federal common
law doctrine was not preempted by. the FIRREA and re-
mained good law in this Circuit). In Motorcity II] we con-
cluded that “the analysis set forth in our prior en banc opinion
{Motorcity I reflects the most reasonable reading of Con-
gress’s intent — i.e., that Congress did not intend FIRREA to
displace the D’Oench doctrine, but rather intended to con-
tinue the harmonious, forty-year coexistence of the statute
and the D’Oench doctrine.” Jd. at 1144.
Murphy argues nevertheless that we should apply the law
of the D.C. Circuit rather than our own law to his claims be-
cause ‘the law of the transferor court should. govern in the
context of transfers pursuant to 28 U.S.C. § 1404(a). Al-
though this circuit has not addressed the question of whether a
transferee court shoyld follow its own interpretation of federal
law or that of the transferor court, several other circuits have
addressed the question, and all have concluded that the trans-
feree court should apply its own interpretation of federal law.
We find the reasoning of these circuits persuasive.
In Jn re Korean Air Lines Disaster of September 1, 1983,
829 F.2d 1171 (D.C. Cir. 1987), the D.C. Circuit addressed
the question of what law to apply to a number of wrongful
death actions that were transferred to the District of Columbia
pursuant to 28 U.S.C. § 1407 for consolidated pretrial pro-
ceedings. The substantive issue before the court was whether
the per-passenger damage limits set by the Warsaw Conven-
tion should be applied to limit Korean Air Lines’ liability
when the type size of the liability limit printed on the tickets
App. A9
was smaller than the size required by the Montreal Agree-
ment. The district court, interpreting District of Columbia
- law, held that the damage limits were applicable. See Jn re
Korean Air Lines Disaster of September 1, 1983, 664 F. Supp.
1463 (D.D.C. 1985). This ruling was, however, contrary to
precedent in the Second Circuit where several of the cases
had originally been filed. See In re Korean Air Lines Disas-
ter, 829 F.2d at 1172. The D.C. Circuit affirmed the district
court’s order squarely holding “that the district court properly
adhered to its own interpretation of the Warsaw Conven-
tion/Montreal Agreement in all actions, including those trans-
ferred from district courts within the Second Circuit.” Jd. at
1173.
The court also distinguished /n re Korean Air Lines from
Van Dusen v. Barrack, 376 U.S. 612, 84 S. Ct. 805, 11
L.Ed.2d 945 (1964), in which the Supreme Court held that
when a defendant in a diversity action moves for a transfer of
venue under 28 U.S.C. 1404(a), the state law that would have
appiied in the transferor court adheres to the case. See Van
Dusen, 376 U.S. at 637-39, 84 S. Ct. at 820. The D.C. Circuit
explained that the logic behind Van Dusen — reflecting the
need to ensure that federal and state courts uniformly apply
the same state law to diversity cases regardless of where the
cases are tried — does not apply to a case brought under fed-
eral law because federal law is supposed to be unitary. /n re
Korean Air Lines, 829 F.2d at 1175-76. As the Circuit Court
explained:
Our system contemplates differences between different
states’ laws; thus a multidistrict judge asked to apply
divergent state positions on a point of law would face a
coherent, if sometimes difficult, task. But it is logically
inconsistent to require one judge to apply simultane-
ously different and conflicting interpretations of what is
supposed to be a unitary federal law.
Id. at 1175-76. The court concluded that “[t]he federal courts
.. Owe respect to each other’s efforts and should strive to
App. Al0
avoid conflicts, but each has an obligation to engage inde-
pendently in reasoned analysis. Binding precedent for all is
set only by the Supreme Court, and for the district courts
within a circuit, only by the court of appeals for that circuit.”
Id. at 1176. - |
The Second, Eighth, and Ninth Circuits uniformly have
agreed with the D.C. Circuit that in cases where federal law is
at issue, transferee courts are obligated to follow their own
interpretation of the relevant law. See Campos v. Ticketmas-
ter Corp., 140 F.3d 1166, 1171 n. 4 (8th Cir. 1998) (holding
that the consolidated issues the court was hearing were con-
trolled by the law of its circuit and not the law of the various
circuits from which the cases were transferred); Temporo-
mandibular Joint (TMJ) Implant Recipients v. E.1. DuPont De
Nemours & Co., 97 F.3d 1050, 1055 (8th Cir. 1996) (holding
that “[w]hen analyzing questions of federal law, the transferee
court should apply the law of the circuit in which it is lo-
cated”); Newton v. Thomason, 22 F.3d 1455, 1460 (9th Cir.
1994) (same); Menowitz v. Brown, 991 F.2d 36, 40-41 (2d
Cir. 1993) (same).*
* The Seventh Circuit has also agreed, in dicta, in the factually dissimilar
case of Eckstein v. Balcor Film Investors, 8 F.3d 1121 (7th Cir. 1993),
with the reasoning of the D.C. Circuit. Eckstein involved a question of the
appropriate statute of limitations for a claim of fraud arising under § 10(b)
of the Securities Exchange Act of 1934. The case involved two sets of
plaintiffs, both of whom filed their action before 1990. When the litiga-
tion began, federal courts throughout the country derived the periods of
limitations in § 10(b) cases from state law. See Eckstein, 8 F.3d at 1124.
However, in July 1990, the Seventh Circuit overruled its opinions that had
looked to state law and held that § 13 of the Securities Act of 1933 sup-
plied the proper statute of limitations for § 10(b) fraud claims. See Short
v. Belleville Shoe Manufacturing Co., 908 F.2d 1385 (7th Cir. 1990). In
June 1991, the Supreme Court agreed with the Seventh Circuit that the
federal securities laws are the proper source of the period of limitations
but selected § 9(e) of the Securities Exchange Act of 1934 as the most
appropriate rule. See Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gil-
bertson, 501 U.S. 350, 364 n. 9, 111 S. Ct. 2773, 2782 n. 9, 115 L. Ed.2d
321 (1991). Congress responded to Lampf by enacting stopgap legislation
App. All
We find the reasoning of the D.C., Second, Eighth, and
Ninth Circuits persuasive. Since the federal courts are all in-
terpreting the same federal law, uniformity does not require
that transferee courts defer to the law of the transferor circuit.
Therefore, we conclude that the law of the Eleventh Circuit,
rather than the law of the D.C. Circuit, regarding the contin-
ued viability of the D’Oench, Duhme doctrine, was properly
applied in this case.
B.
Second, Murphy argues that even if the law of the Elev-
enth Circuit should, in general, be applied to cases transferred
which provided that the proper period of limitations for cases filed on or
before June 19, 1991, was the limitation period provided by the laws in
the applicable jurisdiction as those law existed on June 19, 1991. See
Eckstein, 8 F.3d at 1124 (quoting § 27A of the °34 Act, 15 U.S.C.
§ 78aa-1(a)). The district court in Eckstein held that under the stopgap
legislation provided by § 27A, the law of the Seventh Circuit as stated in
Short should control the statute of limitations imposed on both the plain-
tiffs who filed originally in the Seventh Circuit and those who filed origi-
nally in the Ninth Circuit. See Majeski v. Balcor Entertainment Co. Lid.,
786 F. Supp. 1458, 1461 (E.D. Wis. 1992). On appeal, the Seventh Cir-
cuit faced the question of the proper application of § 27A to transferred
cases. The Seventh Circuit agreed with the D.C. Circuit's reasoning in /n
re Korean Air Lines that a transferee court should normally use its own
best judgment about the meaning of federal law when evaluating a federal
question. According to the court, “A single federal law implies a national
interpretation. Although courts of appeals cannot achieve this on their
own, the norm is that each court of appeals considers the questions inde-
pendently and reaches its own decision, without regard to the geographic
location of the events giving rise to the litigation.” Eckstein, 8 F.3d at
1126. The court concluded, however, that Congress’ stopgap legislation
required a different result in this case. The Seventh Circuit held that
§ 27A required them to apply the statute of limitations of the Seventh Cir-
cuit to the plaintiffs who filed originally in Wisconsin and the statute of
limitations of the Ninth Circuit to the plaintiffs who filed originally in
California as those laws existed on June 19, 1991. /d. at 1127-28. Unlike
in Eckstein, there is no Congressional mandate in the present case in-
structing us to depart from the usual rule that a court of appeals must ap-
ply its own interpretation of federal law.
App. Al2
here, the previous holding of the D.C. Circuit in this case —
that the D’Oench, Duhme doctrine has been preempted by the
FIRREA -— binds this Court as “law of the case.” “[L]aw of
the case is an amorphous concept.” Arizona v. California,
460 U.S. 605, 618, 103 S. Ct. 1382, 1391, 75 L.Ed.2d 318
(1983). The doctrine provides that “when a court decides
upon a rule of law, that decision should continue to govern
the same issues in subsequent stages in the same case.” Jd;
see also Robinson v. Parrish, 720 F.2d 1548, 1549-50 (11th
Cir. 1983). The purpose of the doctrine is to bring an end to
litigation by foreclosing the possibility of repeatedly litigating
an issue already decided. See Wheeler v. City of Pleasant
Grove, 746 F.2d 1437, 1440 (11th Cir. 1984); United States
v. Williams, 728 F.2d 1402, 1406 (11th Cir. 1984); Robinson,
720 F.2d at 1550. The law of the case doctrine does not,
however, require rigid adherence to rulings made at an earlier
stage of a case in all circumstances. See Robinson, 720 F.2d
at 1550. The doctrine “directs a court’s discretion, it does not
limit the tribunal’s power.” Arizona, 460 U.S. at 618, 103
S. Ct. 1382; see also DeLong Equip. Co. v. Washington Mills
Electro Minerals Corp., 990 F.2d 1186, 1196 (11th Cir. 1993)
(noting that the doctrine “‘is not an inexorable command that
rigidly binds the court to its former decisions, but rather is an
expression of good sense and wise judicial practice”) (quot-
ing Terrell v. Household Goods Carriers’ Bureau, 494 F.2d
16, 19 (Sth Cir. 1974)). Both the Supreme Court and this Cir-
cuit have made clear that reconsideration of a prior holding is
not improper if the court is convinced that the prior decision
is clearly erroneous and would work manifest injustice. See
Arizona, 460 U.S. at 619 n. 8, 103 S. Ct. at 1391 n. 8;
Wheeler, 746 F.2d at 1440 (citing United States v. Robinson,
690 F.2d 869, 872 (11th Cir. 1982)). Such is the case here.
We have explicitly rejected, in both Motorcity / and Motorcity
II, the D.C. Circuit’s prior ruling regarding the preemption of
the D’Oench, Duhme doctrine. We are not, therefore, bound
by the “law of the case” doctrine to adhere to a ruling with
which we have emphatically and repeatedly disagreed.
App. Al3
C.
Third, Murphy argues that even under current Eleventh
Circuit law the D’Oench, Duhme doctrine should not be ap-
plied in this particular case because, Southeast, unlike the vast
majority of FDIC receiverships, generated a $150 million
surplus. Murphy suggests that because, under 12 U.S.C. §
1821(d)(11)(B), the bank’s shareholders are allowed to divide
funds remaining in a receivership pool after the creditors have
been paid in full, applying the D’Oench, Duhme doctrine in
this case would unfairly allow Southeast’s shareholders to
benefit from Murphy’s loss. Murphy contends that allowing
the bank’s shareholders to divide what remains of his lost in-
vestment is contrary to notions of equity.
Murphy can point us to no case law, however, saying or
even suggesting that the D’Oench, Duhme doctrine does not
apply in cases where the receivership has generated a surplus.
Rather, Murphy cites cases favoring the use of corporate as-
sets to discharge debts before corporate stockholders are paid.
See Bankers Trust Co. v. Florida East Coast Ry. Co., 31
F. Supp. 961, 964 (S.D. Fla. 1940) (ordering preferential
payment by receivers of defendant railroad of previously en-
tered judgment awarding plaintiff damages for the wrongful
death of her husband); Hoyt v. Hampe, 206 lowa 206, 214
N.W. 718, 719 (1927) (explaining that “[t]he stockholders of
a corporation are not entitled to a distribution of the assets
among themselves while corporate debts remain unpaid”).
Neither of these cases involve the FDIC as a party, and they
do not implicate or shed light on the applicability of the
D'Oench, Duhme doctrine in cases of surplus.°
* The third case Murphy cites in support of his surplus argument, First
Intersiate Bank of Texas, N.A. v. First National Bank of Jefferson, 928
F.2d 153 (Sth Cir. 1991), also does not involve the D’Oench, Duhme doc-
trine and merely underscores the inapplicability of these cases to the
question at hand. In First Interstate Bank the court expressly states that
“(t]he D’Oench, Duhme doctrine protects the FDIC, not a solvent bank.
App. Al4
As we explained in Motorcity |, the purpose of the
D’Oench, Duhme doctrine is to ensure that the FDIC can rely
on the records of a failed bank to determine quickly whether
to engage in a purchase and assumption transaction, or
whether to liquidate the failed bank and pay off insured de-
posits. Motorcity 1, 83 F.3d at 1324. “Neither the FDIC nor
state banking authorities would be able to make reliable
evaluations if bank records contained seemingly unqualified
notes that are in fact subject to undisclosed conditions.” Mo-
torcity 1, 83 F.3d at 1325. Permitting the doctrine to be over-
ridden if a receivership generates a surplus in the future un-
dermines the doctrine’s purpose of enabling the FDIC to
make informed and accurate evaluations of a failed bank’s
assets and liabilities at the outset of the receivership in order
to determine the best way to manage the bank’s losses. Indeed
the rationale of D’'Oench, Duhme — to protect the FDIC from
enforcement of oral agreements against failed financial insti-
tutions — is no less compelling if the failed institution eventu-
ally generates a surplus. The exception Murphy favors would
eviscerate the doctrine. We conclude, therefore, that neither
precedent nor the doctrine’s purpose counsel in favor of cre-
ating an exception to the application of the D’Oench, Duhme
doctrine for cases in which a receivership generates a surplus.
D.
Finally, Murphy argues that the D’Oench, Duhme doc-
trine is no longer good law because it has been supplanted by
the FIRREA. Murphy argues that the Supreme Court’s deci-
sions in O'Melveny & Myers v. FDIC, 512 U.S. 79, 1148S. Ct.
2048, 129 L.Ed.2d 67 (1994), and Atherton v. FDIC, 519 U.S.
213, 117 S. Ct. 666, 136 L. Ed.2d 656 (1997), require such
preemption. Our Circuit has already spoken clearly on this
issue rejecting precisely this claim.
In O'Melveny & Myers, the FDIC, as receiver of a failed
The district court correctly declined to extend the doctrine to this case in
which the FDIC is not a party.” /d., 928 F.2d at 156.
App. Al5
California savings and loan (S&L), brought a malpractice
lawsuit against the savings and loan’s former law firm,
pleading causes of action under California law for profes-
sional negligence and breach of fiduciary duty. /d., 512 U.S.
at 82, 114 S. Ct. at 2052. The FDIC alleged that the law firm
failed to inform the S&L of the illegal acts of the S&L’s con-
trolling officers. /d. The law firm defended by arguing that,
under California law, knowledge of the conduct of the S&L’s
. controlling officers must be imputed to the S&L, and hence to
the FDIC, which, as receiver, stood in the S&L’s shoes. Id.
The FDIC urged the Court to create a new federal common
law rule to govern the imputation of knowledge to the FDIC.
Id. at 83, 114 S. Ct. at 2052. The Court declined to do so.
First, the Court explained that, by statute, California, rather
than federal common law, governed imputation of corporate
officers’ knowledge to the FDIC. The Supreme Court noted
that 12 U.S.C. § 1821(d)(2)(A)(i), as amended by the
FIRREA, “places the FDIC in the shoes of the insolvent S&L,
to work out its claims under state law except where some
provision in the extensive framework of FIRREA provides
otherwise.” /d., at 87, 114 S. Ct. at 2054. Moreover, the
Court explained that even if the FIRREA was not applicable
in the present case this was not a case “in which judicial crea-
tion of a special federal rule would be justified.” /d. at 87,
114 S. Ct. at 2055.°
In Atherton, the Resolution Trust Corporation (later re-
placed by the FDIC) sued several officers and directors of the
failed City Federal Savings Bank claiming that they had vio-
lated the legal standard of care they owed that federally in-
sured institution. /d., 519 U.S. at 215, 117 S. Ct. at 668. The
* The Court explained that the creation of federal common law was justi-
fied only in those limited situations where “there is a ‘significant conflict
between some federal policy or interest and the use of state law.’”
O'Melveny, 512 U.S. at 87, 114 S. Ct. at 2054 (quoting Wallis v. Pan
American Petroleum Corp., 384 U.S. 63, 68, 86 S. Ct. 1301, 1304, 16
L.Ed.2d 369 (1966)).
App. Al6
Supreme Court addressed the question of where courts should
look to find the standard of care against which to measure the
legal propriety of the defendants’ conduct — to state law, to
federal common law, or to a provision of the FIRREA, 12
U.S.C. § 1821(k). Jd. at 215-216, 117 S. Ct. at 669. The dis-
trict court had held that the federal statute, § 1821, provided
the appropriate standard of care. /d. at 216, 117 S.Ct. at 669.
The Court of Appeals for the Third Circuit reversed holding
that the federal statute provided only a baseline leve! of care
but did not prohibit actions resting upon stricter rules origi-
nating in either state law or in federal common law. /d. at
217, 117 S. Ct. at 669. The Supreme Court vacated the Third
Circuit opinion. As an initial matter the Court held that the
federal common law corporate governance standards articu-
lated by the Court in Briggs v. Spaulding, 141 U.S. 132, 11
S. Ct. 924, 35 L. Ed. 662 (1891), did not survive the Court’s
later decision in Erie R. Co. v. Tompkins. Id., at 226, 117 S.
Ct. at 674. As a result, the Court made clear: “There is no
federal common law that would create a general standard of
care applicable to this case.” /d. The Court then went on to
consider whether federal statute, 12 U.S.C. § 1821, or state
law provided the appropriate standard of care in the case. The
Supreme Court held that the federal statute’s “gross negli-
gence” standard provided a floor, but did not stand in the way
of a stricter state-law standard making directors and officers
liable for less egregious conduct. /d. at 227, 117 S. Ct. at
674.
In Motorcity I and Motorcity I] we ruled decisively and en
banc that the Supreme Court’s decisions in O'Melveny and
Atherton did not abrogate our prior holdings regarding the
continued viability of the D'Oench, Duhme doctrine. We ex-
plained that both O'Melveny and Atherton dealt with the
question of whether to create new federal common law in
particular areas rather than with the question of whether Con-
gress intended the FIRREA to supplant “the previously estab-
lished and long-standing federal common law D’Oench doc-
se a
:
4
;
;
App. Al7
trine.” Motorcity I], 120 F.3d at 1143; see also Motorcity I,
83 F.3d at 1330. In Motorcity IJ, our affirmation of the
D’Oench, Duhme doctrine in light of the FIRREA and the
Supreme Court’s decisions in O'Melveny and Atherton was
explicit:
[W]e decline to accept Motorcity’s invitation to overrule
D'Oench. With the D'Oench doctrine safely in place as
a long-standing federal common law rule, we conclude
that the appropriate analysis for the statutory abrogation
issue presented in this case is that articulated in United
States v. Texas,’ and not that articulated in Atherton and
O'Melveny. We continue to believe that the analysis set
forth in our prior en banc opinion reflects the most rea-
sonable reading of Congress’s intent — i.e., that Con-
gress did not intend FIRREA to displace the D ‘Oench
doctrine, but rather intended to continue the harmonious,
forty-year coexistence of the statute and the D’Oench
doctrine. .
Id., 120 F.3d 1140, 1144. This panel is bound by the Cir-
cuit’s prior en banc decision. See Chambers v. Thompson,
150 F.3d 1324, 1326 (11th Cir.1998) (noting that “[wJe are
bound to follow a prior panel or en banc holding, except
where that holding has been overruled or undermined to the
” In United States v. Texas, 507 U.S. 529, 113 S. Ct. 1631, 123 L. Ed.2d
245 (1993), the Supreme Court noted the “longstanding ... principle that
‘[s}tatutes which invade the common law ... are to be read with a pre-
sumption favoring the retention of long-established and familiar princi-
ples, except when a statutory purpose to the contrary is evident.”” /d. 507
U.S. at 534, 113 S. Ct. 1631 (quoting /sbrandtsen Co. v.-Johnson, 343
U.S. 779, 783, 72 S. Ct. 1011, 1014, 96 L. Ed. 1294 (1952)). The Court
held that “[i)n order to abrogate a common-law principle, the statute must
‘speak directly’ to the question addressed by the common law.” /d. (citing
Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625, 98 S. Ct. 2010,
2015, 56 L. Ed.2d 581 (1978); Milwaukee v. Illinois, 451 U.S. 304, 315,
101 S. Ct. 1784, 1791, 68 L. Ed.2d 114 (1981)).
App. Al8
point of abrogation by a subsequent en banc or Supreme
Court decision”).
Therefore, under the D’Oench, Duhme doctrine, Murphy
has failed to state a claim against the FDIC because he has not
alleged a written agreement between Southeast and Orchid
establishing their joint venture relationship, the D’‘Oench,
Duhme doctrine remains good law in this Circuit, and there is
no sound reason not to apply the doctrine in this case. Ac-
cordingly, we affirm the district court’s order dismissing
Murphy’s complaint.*
AFFIRMED. -
* In view of this ruling, we need not address the district court’s alternative
grounds for dismissal.
ow eanacetink, ~/
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App. Bl
APPENDIX B
829 F. Supp. 3
Bruce G. MURPHY, pro se, Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORP., as Re-
ceiver for Southeast Bank, Defendant.
Civ. A. No. 92-1924 (CRR).
United States District Court,
District of Columbia.
Aug. 10, 1993.
Bruce G. Murphy, pro se.
Brendan Collins, Atty., U.S. Dept. of Justice, Civil Div.,
Washington, DC, together with Stuart E. Schiffer, Acting
Asst. Atty. Gen., J. Ramsey Johnson, U.S. Atty. District of
Columbia, John O. Birch, Asst. U.S. Atty., and J. Christopher
Kohn, and Robert M. Hollis, U.S. Dept. of Justice, Civil Div.,
Washington, DC, for defendant.
MEMORANDUM OPINION
CHARLES R. RICHEY, District Judge.
The above-captioned case is before the Court on the
Plaintiff's Motion for Summary Judgment on Counts | and II,
the Defendant’s Motion to Dismiss the entire action, and the
Defendant’s Motion to Stay Discovery Pending Resolution of
its Motion to Dismiss. After careful review of the above mo-
tions, the oppositions and replies thereto, and the applicable
law, the Court shall grant Summary Judgment for the Defen-
dant.
' Because the Defendant’s Motion to Dismiss relies on matters outside the
pleadings, the Court shall treat the Motion as one for Summary Judgment.
See Fed.R.Civ.P. 12(c).
App. B2
I. BACKGROUND
The Plaintiff, Bruce Murphy, was a limited partner in Or-
chid Island Associates Limited Partnership (“Orchid”), a real
estate developer financed by Southeast Bank, N.A. (“South-
east”). Southeast loaned Orchid approximately $50 million
between 1988 and 1990.
According to the Complaint, Orchid was the developer of
the Orchid Island Golf and Beach Club project near Vero
Beach, Florida (“the Project”). In 1989, the Plaintiff invested
$515,672.37 to become a limited partner in Orchid. When
sales revenues slowed, a plan was devised whereby Orchid
would hold a public bond offering to raise funds. Orchid was
to take a “bridge” loan from Southeast, and other Orchid
principals would take additional loans from Southeast, to
carry the project until the bond offering was complete. The
proceeds from the bond offering were intended to repay the
bridge loan and decrease Orchid’s outstanding debt with
Southeast. When the participants learned that the bond fi-
nancing would result in a lien on the project superior to theirs,
they rejected the bond offering and the deal fell through. Or-
chid’s financial position subsequently worsened, and South-
east placed Orchid in default on its loans and foreclosed on
the Orchid mortgages.
The Plaintiff contends that Southeast, by its actions in
connection with the Project, was a partner with Orchid and
exercised control over the Project and the actions of Orchid.
The Plaintiff contends that Southeast’s actions resulted in
harm to the Plaintiff's financial interest in the Project. On
September 19, 1991, Southeast was declared insolvent and
subject to Federal Deposit Insurance Corporation (“FDIC”)
receivership. On December 16, 1991, the Plaintiff filed a
proof of claim with the FDIC for $602,031.54, an amount
comprised of the initial investment, expenses, and attorney
fees. On June 23, 1992, the FDIC disallowed the Plaintiff's
claim stating that the FDIC was not liable for any alleged
damages. The FDIC declined to grant an administrative
App. B3
hearing to review this determination. On August 20, 1992,
the Plaintiff brought suit in this Court against the FDIC as
receiver for Southeast. The Plaintiff's Complaint alleges
breach of fiduciary duties, breach of contract, accounting de-
ficiencies, fraud, negligent misrepresentation, and an unlaw-
ful offer to sell securities.
The FDIC has moved to dismiss Counts III through IX of
the Plaintiff's Complaint pursuant to Fed.R.Civ.P. 12(b)(6),
arguing that the doctrine of D’Oench, Duhme & Company v.
FDIC, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942), and
12 U.S.C. § 1823(e) bar these claims. More specifically,
FDIC argues that the Plaintiff cannot sue Southeast under a
joint venture theory, because all written documentation on the
relationship between Orchid and Southeast explicitly rejects a
joint venture relationship. The FDIC has also moved to dis-
miss the remaining Counts I and II, arguing that under 12
U.S.C. § 1821(d)(7)(A), the FDIC has discretion to determine
when to establish administrative procedures to review claims,
and that even if the FDIC is obligated to establish such proce-
dures, they have discretion to determine which individual
claimants are entitled to review. After careful review of the
entire record in this action and the applicable law, the Court
concludes that there are no material issues of fact in dispute
that would preclude the entry of summary judgment for the
Defendant.’
* Summary judgment is awarded when there is no genuine issue as to any
material fact and the moving party is entitled to a judgment as a matter of
law. Fed.R.Civ.P. 56(c). It is well established that the Court must believe
the non-movant’s evidence and draw all justifiable inferences in his or her
favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct.
2505, 2513, 91 L. Ed.2d 202 (1986). A factual dispute must be material in
order to preclude summary judgment; that is, it must be a dispute that
may affect the outcome of the suit under the governing law. Liberty
Lobby, 477 U.S. at 248, 106 S. Ct. at 2510.
App. B4
Il. THE COURT SHALL GRANT SUMMARY
JUDGMENT FOR THE DEFENDANT ON COUNTS V
THROUGH IX BECAUSE THE PLAINTIFF CANNOT
RECOVER AGAINST THE FDIC UNDER AN ALLEGED
UNWRITTEN JOINT VENTURE AGREEMENT
PURSUANT TO D'OENCH, DUHME & COMPANY V.
FDIC, 315 U.S. 447 (1942), AND 12 U.S.C. § 1823(e).
In Counts V through IX, the Plaintiff alleges breach of fi-
duciary duty, breach of contract, fraudulent omissions and
representations, and negligent misrepresentations by South-
east. The Court concludes that Summary Judgment must be
granted for the Defendant on these five claims because the
Plaintiff cannot recover against Southeast on any theory of an
alleged unwritten joint venture agreement pursuant to
D’Oench, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 and 12
U.S.C. § 1823(e).
The Plaintiff claims that Southeast and Orchid were part-
ners in an unwritten joint venture agreement in connection
with the Project. The crux of the Plaintiff's allegations is that
Southeast acted in concert with Orchid in making decisions
pertaining to the Orchid development that were separate and
apart from Southeast’s role as a mere lender to Orchid.’
’ For example, in Count V, the Plaintiff alleges that Southeast breached a
fiduciary duty to the Plaintiff by failing to “exercise good faith, reasonable
business judgment, and integrity in handling partnership affairs.” Compl.
at ¥ 40. In addition, in Count VI, the Plaintiff alleges that Orchid and
Southeast were parties to an investment agreement with the _— Plaintiff in
August, 1989, whereby the Plaintiff was to be paid an annual monetary
‘sum. The Plaintiff further alleges breach of this contract by Southeast.
See Compl. at 4 43. In Count VII, the Plaintiff alleges that Orchid
breached its duty under the April 30, 1989 Accounting of the Second and
Restated Limited Partnership, whereby Orchid was to furnish to each lim-
ited partner an annual audit report, a quarterly unaudited report, and an
annual copy of the 1065 k-1 form. The Plaintiff seeks these documents
for 1990 and 1991. However, this Count only refers to Orchid in connec-
tion with these reports and thus fails to state a claim against Southeast, and
f App. BS
However, such a claim is not cognizable under the law
absent a written document. A party cannot rely on unre-
corded agreements with a bank as the basis for claims or de-
fenses against the FDIC. D’Oench, 315 U.S. 447, 62 S. Ct.
676; Bowen v. FDIC, 915 F.2d 1013 (Sth Cir.1990); see also
Franklin Asaph Ltd. v. FDIC, 794 F. Supp. 402 (D.D.C.
1992). Under D ’‘Oench, transactions that do not appear on the
bank’s books are not cognizable in a court of law. Bowen,
915 F.2d at 1016. The policy underlying the D’Oench doc-
trine is “to protect [the FDIC], and the public funds which it
administers, against misrepresentations as to the securities or
other assets [and liabilities] in the portfolios of the banks
which [the FDIC] insures.” D’Oench 315 U.S. at 457, 62
S.Ct. at 679. While the original D’Oench case involved a
party attempting to use an oral promise as a defense to a suit
on a note issued by the FDIC, the modern D’Oench doctrine
also applies when the FDIC is acting in its capacity as re-
ceiver, as is the case here. See Bell & Murphy & Assoc., Inc.
v. Interfirst Bank Gateway, 894 F.2d 750, 753 (Sth Cir.1990),
cert. denied, 498 U.S. 895, 111 S. Ct. 244, 112 L.Ed.2d 203
(1990); see also Bowen, 915 F.2d at 1015.
In this case, there are no documents establishing the exis-
tence of a joint venture between Orchid and Southeast. Fur-
thermore, the loan agreements here explicitly reject a joint
venture between Southeast and Orchid. The first three loan
agreements expressly provide that “[t]he Lender is a lender
only and shall not be considered a shareholder, joint venturer
therefore the FDIC, for breach fiduciary duty to provide these reports to
the Plaintiff.
Finally, in Count VIII and [X, the Plaintiff alleges that Southeast’s
failure to inform Orchid of the requirement that the participants approve
the proposed bond offering constituted fraudulent omis »ns and repre-
sentations and negligent misrepresentations. See Compl. at 4 47-50. The
Plaintiff alleges that these omissions and representations induced Orchid
to take an additional loan and expend other resources in anticipation of the
bond offering.
App. B6
or partner of the Borrower.”* Furthermore, the final loan
agreement on March 21, 1991, states that:
At no time did the Lender engage in or attempt to en-
gage in or in any way involve itself in active manage-
- ment marketing, operation or control of the Project and
has not, at any time, acted as a joint venturer in or a
partner with the Debtor parties in connection with the
Project. In the future; at no time shall Lender be con-
strued as having acted, as a joint venturer in or a partner
with the Debtor Parties in connection with the Project.
See Defendant’s Motion to Dismiss at 6 (emphasis added).
The Plaintiff argues that his claims should not be barred
because D 'Oench only applies to a borrower of the bank who
is trying to avoid an obligation. See Plaintiff's Opp’n at 4-5.
He further contends that the D 'Oench doctrine does not apply
to certain tort claims that do not appear on the books of a
failed bank. /d. at 3. The Court disagrees. The D’Oench
doctrine acts as a bar where the Plaintiff is an investor, as
well as when the Plaintiff is a borrower. See Jn re NBW
Commercial Paper Litigation, 826 F.Supp. 1448, 1461-62
(D.D.C.1992). This is consistent with the logic of D’Oench
which bars claims by any parties who, unlike depositors, were
capable of protecting themselves through written agreements.
Id.
Furthermore, “{tjorts and other claims which center
around an unrecorded agreement are also barred, even though
the plaintiff is not asserting the agreement itself explicitly
against the FDIC.” Jn re NBW Commercial Paper Litigation,
826 F.Supp. at 1465; see also, FDIC v. State Bank of Virden,
893 F.2d 139 (7th Cir.1990); but see, Astrup v. Midwest Fed.
Sav. Bank, 886 F.2d 1057, 1059-60 (8th Cir.1989). Thus, the
claims here are exactly the type of claims which are barred by
* This language was contained in the August 30, 1988 loan agreement, the
April 13, 1989 loan agreement, and the January 31, 1990 loan agreement.
App. 7
D'Oench.
In addition, the plain language of § 1823(e) bars this kind
of claim.’ Section 1823(e) provides that:
No agreement which tends to diminish or defeat the in-
terest of the [FDIC] in any asset acquired by it under this
section or section 1821 of this title, either as security for
a loan or by purchase or as receiver of any insured de-
pository institution, shall be valid against the [FDIC]
unless such agreement--
(1) is in writing,
(2) was executed by the depository institution and
any person claiming an adverse interest thereunder, in-
cluding the obligor, contemporaneously with the acqui-
sition of the asset by the depository institution,
(3) was approved by the board of directors of the de-
pository institution or its loan committee, which ap-
proval shall be reflected in the minutes of said board or
committee, and
(4) has been, continuously, from the time of its exe-
cution, an official record of the depository institution.
12 U.S.C. § 1823(e) (1988) (emphasis added).
Thus, the Plaintiff's claims under the alleged joint venture
theory are barred. Accordingly, the Court shall grant Sum-
mary Judgment on Counts V through IX for the Defendant.
iil. THE COURT SHALL GRANT SUMMARY
JUDGMENT FOR THE DEFENDANT ON THE
SECURITIES LAW CLAIMS BECAUSE THE PLAINTIFF
HAS NOT STATED ANY INDEPENDENT BASIS FOR
* This section is “essentially a codification of D’@ench.” Bowen, 915 F.2d
at 1015. Whether the bar of D'Oench and section 1823 is coextensive has
been debated, see In re NBW Commercial Paper Litigation, 826 F Supp.
1448 (D.D.C.1992) however, such an inquiry is not necessary in the in-
stant case.
App. B8
SOUTHEAST’S LIABILITY OTHER THAN AN
ALLEGED UNWRITTEN AGREEMENT.
In Counts III and IV, the Plaintiff alleges securities law
violations which he claims do not rely on a joint venture the-
ory. In Count III the Plaintiff alleges that Orchid violated the
registration requirement of the Virginia Securities Act §
13.1-507 by not registering the Orchid partnership units as
securities. See Compl. at § 35-36. Count IV alleges that the
solicitation letter used by “{Orchid], the general partners, and
{[Southeast]” violated the “Unlawful Offers & Sales Provi-
sions” of the Virginia Securities Act and the Florida Securi-
ties and Investor Protection Act. See Compl. at 4 38. Be-
cause the Plaintiff cannot point to any independent basis for
liability against Southeast separate and apart from an alleged
unwritten agreement, the Court shall also grant Summary
Judgment for the Defendant on these claims.°
The Plaintiff argues that he can establish a degree of con-
trol by Southeast over the Project sufficient to satisfy §
13.1-522(B) even if he cannot establish the joint venture the-
ory. See Plaintiff's Opp’n at 5-6. However, the Plaintiff can-
not establish that Southeast was a “material participant” be-
cause, as set forth above, all of the written agreements be-
tween Orchid and Southeast explicitly reject the proposition
that Southeast was anything more than simply a lender to Or-
chid. To the extent that the Plaintiff attempts to rely on an
unwritten agreement to prove these securities violations
claims, they are again barred by D’Oench. Courts have held
* In his Complaint, the Plaintiff does not even mention Southeast in the
discussion of Count III, and thus on the face of the Complaint, the Plain-
tiff does not state any cause of action against Southeast. Not until his Op-
position to the Defendant’s Motion to Dismiss, does the Plaintiff allege
that Southeast is also liable for this alleged violation under Va.Code Ann.
§ 13.1-522(B) which makes “material participants” in an unlawful sale
also liable for any violations. However, even under the theory set forth in
the Plaintiff's Opposition, this claim must fail because it is still barred by
D'Oench and § 1823(e).
App. B9
that D’Oench prohibits any claims based upon an unwritten
agreement, even where the claims have been characterized as
violations of securities laws. See Jn re NBW Commercial Pa-
per Litigation, 826 F. Supp. at 1466-69; see also [sic] (citing
Kilpatrick v. Riddle, 907 F.2d 1523, 1529 (Sth Cir.1990), cert.
denied, 498 U.S. 1083, 111 S. Ct. 954, 112 L. Ed.2d 1042
(1991)).’ Accordingly, the Court shall grant Summary Judg-
ment on Count III for the Defendant.
Even assuming arguendo, that the Plaintiff once had a
cognizable securities law claim not arising under a joint ven-
ture theory, the Plaintiff's claims would still be barred under
§ 13.1-522(D) which provides that “{n]Jo suit shall be main-
tained to enforce any liability created under this section [in-
cluding § 13.t-502 and § 13.1-507] unless brought within two
years after the transaction upon which it is based.” Here the
Plaintiff invested in Orchid in August of 1989. See Compl. at
4 19. However, the Plaintiff did not file the current action
until August 20, 1992. See Compl. at 1. Thus, the Plaintiff's
securities claims are barred under the plain language of the
Virginia statute. .
IV. THE COURT SHALL GRANT SUMMARY
JUDGMENT FOR THE DEFENDANT ON THE
ADMINISTRATIVE CLAIMS BECAUSE, UNDER THE
PLAIN LANGUAGE OF THE STATUTE, THE FDIC HAS
DISCRETION IN DETERMINING WHETHER TO
ESTABLISH PROCEDURES TO REVIEW CLAIMS.
The Plaintiff also seeks declaratory relief and mandamus
alleging that the FDIC did not provide the Plaintiff with an
” A claim for securities violations against the FDIC is cognizable when the
act being sued on has no connection to an unwritten agreement but rather
involves an independent basis for liability. See In re NBW Commercial
Paper Litigation, 826 F. Supp. at 1467-68 (Claim for an unlawful sale of
securities in violation of the Securities Act of 1933 not barred by
D’Oench). However, no such independent basis for liability exists in this
case.
App. B10
administrative hearing or other alternative dispute resolution
procedure pursuant to 12 U.S.C. § 1821(d)(7)(A) or 12 U.S.C.
§ 1821(d)(7)(B) to review the denial his claim. The Court
finds however, that the FDIC has discretion in determining
whether to establish review procedures, and thus the Court
shall grant Summary Judgment for the Defendant on these
claims.
The plain language of section 1821(d)(4) provides that the
FDIC “may prescribe regulations ... providing for adminis-
trative determination of claims and review of such determina-
tion.” (emphasis added). More specifically, an administra-
tive hearing may be provided “if any claimant requests review
... and the [FDIC] agrees to such request ....”. 12 U.S.C.
§ 1821(d)(7)(A) (emphasis added). Finally, the FDIC may
provide other review procedures “as may be appropriate.” 12
U.S.C. § 1821(d)(7)(B\(i). These provisions grant the FDIC
discretion in determining whether to establish procedures to
review claims. Furthermore, courts interpreting these sec-
tions have held similarly. See FDIC v. Hanson, 799 F. Supp.
954, 958 (D.Minn.i992) (FDIC has no obligation under §
1821(d)(4) to establish administrative procedures for the re-
view of its denial of a claim); see also, Mansolillo v. FDIC,
804 F. Supp. 426, 430 (D.R.1.1992). Finally, even assuming
arguendo, that the FDIC was required to establish such proce-
dures, the statute still provides the FDIC with discretion to
determine which particular claimants are entitled to review.
See § 1821(d)(7)(A). Thus, because the Plaintiff is not enti-
tled to an administrative review of his claim, the Court shall
grant Summary Judgment on Counts I and II for the Defen-
dant.
V. CONCLUSION
For all the reasons stated above, the Court concludes that
the Plaintiff's claims are barred by the doctrine of D’Oench,
Duhme & Company v. FDIC, 315 U.S. 447, 62 S. Ct. 676, 86
L. Ed. 956 (1942), and 12 U.S.C. § 1823(e). Accordingly, the
Court shall grant Summary Judgment for the Defendant.
App. B11
Furthermore, the Court shall deny the Defendant’s Motion to
Stay Discovery Pending Resolution of its Motion to Dismiss
as moot. The Court shall enter an Order of even date here-
with in accordance with this Memorandum Opinion.
ORDER
Upon consideration of the Plaintiff's Motion for Summary
Judgment, the Defendant’s Motion to Dismiss, and the De-
fendant’s Motion to Stay Discovery Pending Resolution of its
Motion to Dismiss, the oppositions and replies thereto, the
arguments of counsel, the record herein, the applicable law,
and for the reasons articulated in this Court’s Memorandum
Opinion of even date herewith, it is, by the Court, this 10th
day of August, 1993,
ORDERED that the Plaintiff's Partial Motion for Sum-
mary Judgment on Counts I and II shall be, and hereby is,
DENIED; and it is
FURTHER ORDERED that the Defendant’s Motion for
Summary Judgment on Counts I through IX shall be, and
hereby is, GRANTED; and it is
FURTHER ORDERED that the Defendant’s Motion to
Stay Discovery Pending Resolution of its Motion to Dismiss
is DENIED as moot; and it is
FURTHER ORDERED that the above-captioned case
shall be, and hereby is, DISMISSED from the dockets of this
Court.
App. Cl
APPENDIX C
61 F.3d 34
Bruce G. MURPHY, Appellant,
v.
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for Southeast Bank, N.A.,
Appellee.
Nos. 93-5268, 93-5412.
United States Court of Appeals,
District of Columbia Circuit.
Argued April 7, 1995.
Decided Aug. |, 1995.
Rehearing and Suggestion for Rehearing In Banc Denied
Oct. 4, 1995.
Appeals from the United States District Court for the
District of Columbia (No. 92cv01924).
Bruce G. Murphy, pro se, argued the cause and filed the
briefs as appellant.
John P. Parker, Sr. Atty., F.D.1.C., Washington, DC, ar-
gued the cause, for appellee. With him on the brief was Ann
S. DuRoss, Asst. Gen. Counsel, and Colleen J. Bombardier,
Sr. Counsel, F.D.I.C., Washington, DC. Claire L. McGuire
and David A. Felt, Attys., F.D.I.C., Washington, DC, entered
appearances.
Before: EDWARDS, Chief Judge; WALD and
GINSBURG, Circuit Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge:
Bruce Murphy, an investor in an unsuccessful real estate
venture, seeks damages from the FDIC on the theory that the
App. C2
failed bank that financed the venture, of which the FDIC is
the receiver, was responsible for his loss. The district court
granted summary judgment in favor of the FDIC upon the
ground that the appellant’s claims are barred both by federal
common law, see D’Oench, Duhme & Co., Inc. v. FDIC, 315
U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956 (1942), and by 12
U.S.C. § 1823(e). We hold that (1) § 1823(e) does not bar
Murphy’s claims because the FDIC has not demonstrated, as
required by that statute, that the FDIC’s interest in a specific
asset would be diminished if the claims were upheld; and (2)
the Supreme Court’s recent decision in O'Melveny & Myers
v. FDIC, 512 U.S. 79, 114 S. Ct. 2048, 129 L. Ed.2d 67
(1994), removes the federal common law D’Oench doctrine
as a separate bar to such claims. We therefore reverse the
district court and remand the case for further proceedings.
I. BACKGROUND
In his complaint Murphy tells the following story (which
we take as true for the purpose of this appeal). In 1989 he
paid approximately $515,000 for one “partnership unit” in the
Orchid Island Associates Limited Partnership, which was then
in the process of developing the Orchid Island Golf and
Beach Club near Vero Beach, Florida. The investment con-
tract guaranteed that he would receive a “6.1 multiple return
on investment” but to date he has received nothing.
Southeast Bank, N.A. was the lead lender for the Orchid
Island project. In the late 1980’s and early 1990’s the bank
made several loans to the partnership, in a total amount ap-
proximating $50 million. Southeast was also involved in a
plan whereby Orchid would engage in a public bond offering
to raise additional funds in order to complete the project.
Pursuant to that plan, Orchid would take a “bridge loan” from
Southeast to cover expenses until the bonds were sold, and
the proceeds from the bond offering would be used both to
repay the bridge loan and to reduce the amounts outstanding
on Southeast’s earlier loans. When Southeast informed Or-
chid’s other lenders that the proposed bond financing would
App. C3
result in a lien on the project superior to theirs, however, they
rejected the proposal and the deal fell through. Orchid subse-
quently defaulted on its loan obligations, and Southeast fore-
closed upon the property. Shortly thereafter Southeast was
itself declared insolvent, the FDIC was appointed receiver of
the bank, and Murphy filed this lawsuit.
Although somewhat vague, the gravamen of Murphy's
claim is that the bank effectively controlled Orchid and thus
assumed the role, and the corresponding legal duties, of a
joint venturer or partner. Murphy contends that the bank is
therefore responsible for various misdeeds allegedly commit-
ted by Orchid officials, including: “failure to register securi-
ties” (count 3); “unlawful offer and sale of securities” (count
4); “breach of fiduciary duties” (cownt 5); “breach of con-
tract” (count 6); and “accounting” improprieties (count 7).
Murphy further contends that, in its role as promoter of the
aborted bond offering, the bank itself engaged in “fraud”
(count 8) and made “negligent misrepresentation{s]” (count
9). In addition, Murphy complains that the FDIC has failed to
establish alternative dispute resolution (ADR) procedures, as
required by statute, and therefore lias improperly denied him
the opportunity to pursue his claim through an ADR channel
(counts | and 2). Murphy seeks money damages (in counts
3-6 and 8-9), and an order requiring the FDIC to give him
certain accounting statements (count 7) and to adopt ADR
procedures and apply them to his claim (counts | -2).
Each of the loan agreements between Orchid and the bank
contains a provision to the following effect: “he Lender is a
lender only and shall not be considered a shareholder, joint
venturer or partner of the Borrower.” Relying upon those
written provisions, Murphy’s inability to point to any written
agreement that supports his joint-venture theory of liability,
the federal common law D’Oench doctrine, and 12 U.S.C. §
1823(e), the district court granted summary judgment in favor
of the FDIC on counts 3 through 9. The district court also
granted summary judgment in favor of the FDIC on the first
App. C4
two counts, holding that, under the governing statute, the
FDIC has the discretion to decide whether to adopt an ADR
procedure and, if it does so, whether a particular claim is suit-
able therefor.
Il. ANALYSIS
Murphy raises distinct substantive and procedural points
before this court. First, he argues that 12 U.S.C. § 1823(e)
does not apply to his substantive claims and that the recent
Supreme Court decision in O'Melveny & Myers v. FDIC
makes clear that the federal common law D'Oench doctrine
has been displaced by a federal statute. Second, he renews
his claim that the FDIC is required to establish an ADR pro-
cedure and to apply it to his claim.
A. 12 U.S.C. § 1823(e)
In 1950, eight years after the Supreme Court decided
D ‘Oench, the Congress enacted the Federal Deposit Insurance
Act, 12 U.S.C. § 1811 et seq., which “bars anyone from as-
serting against the FDIC any agreement not properly recorded
in the records of the bank that would diminish the value of an
asset held by the FDIC.” E./. du Pont de Nemours & Co. v.
FDIC, 32 F.3d 592, 596 (D.C.Cir.1994). That provision, as
modified in 1989 by the Financial Institutions Reform, Re-
covery, and Enforcement Act, Pub.L. No. 101-73, 103 Stat.
183 (better known as the FIRREA), currently provides that:
No agreement which tends to diminish or defeat the in-
terest of the [FDIC] in any asset acquired by it under this
section or section 1821 of this title, either as security for
a loan or by purchase or as receiver of any insured de-
pository institution, shall be valid against the [FDIC]
unless such agreement--
(A) is in writing,
(B) was executed by the depository institution and
any person claiming an adverse interest thereunder, in-
cluding the obligor, contemporaneously with the acqui- —
sition of the asset by the depository institution,
App. C5
(C) was approved by the board of directors of the de-
pository institution or its loan committee, which ap-
proval shall be reflected in the minutes of said board or
committee, and
(D) has been, continuously, from the time of its exe-
cution, an official record of the depository institution.
12 U.S.C.§ 1823(e)(1). The Congress further provided in the
FIRREA that “any agreement which does not meet the re-
quirements set forth in section 1823(e) of this title shall not
form the basis of, or substantially comprise, a claim against
the [FDIC].” 12 U.S.C. § 1821(d)(9){A).
By their terms, these statutory provisions bar any claim
that (1) is based upon an agreement that is either (a) unwritten
or (b) if in writing, does not meet the stringent requirements
of §§ 1823(e)(1)(B)-(D), and (2) would diminish or defeat the
interest of the FDIC in an asset acquired by it in its capacity
as receiver of a failed depository institution. Murphy con-
cedes that his claims (save one) are (1) premised upon the
existence of an unwritten joint-venture agreement between
the bank and Orchid, but argues that § 1823(e) does not bar
his claims because (2) the FDIC has failed to demonstrate that
its interest in any specific asset assigned from Southeast
"would be diminished were he to prevail. He points out that he
is not a borrower (or “obligor” per the statute) attempting to
avoid payment of a loan owed to Southeast Bank but is rather
an investor in a failed business venture in which, he claims,
the failed bank was a culpable participant. To be sure, Mur-
phy’s claims, if successful, would diminish the value of the
bank in the hands of the FDIC but that, according to Murphy,
is not sufficient to meet the “asset” requirement of § 1823(e).
We agree.
We recently held that § 1823(e)(1) is “applicable only to
cases involving a specific asset, usually a loan, which in the
ordinary course of business would be recorded and approved
by the bank’s loan committee or board of directors” and that
App. C6
“the requirements of § 1823(e) effectively limit that provision
to conventional loan transactions.” du Pont, 32 F.3d at 597.
That interpretation gains support from subsection (C) of §
1823(e)(1), which specifically requires that, if a suit is to go
forward, the agreement upon which it is based must have
been approved by “the board of directors of [the bank] or its
loan committee.” See In-Re NBW Commercial Paper Litiga-
tion, 826 F. Supp. 1448, 1463-64 (D.D.C.1992) (§ 1823(e)
applies primarily to loan transactions). An agreement that
does not involve an extension of credit would not ordinarily
be submitted to the board or to a loan committee for approval.
Moreover, while any agreement to make a significant loan
will ordinarily meet the exacting requirements of § 1823(e),
see Langley v. FDIC, 484 U.S. 86, 92, 108 S. Ct. 396, 401, 98
L. Ed.2d 340 (1987) (requirements of § 1823(e) “ensure ma-
ture consideration of unusual loan transactions by senior bank
officials”), those requirements will almost never be met by an
agreement between the bank and an investor, a trade creditor,
or most clearly, a tort claimant (such as Murphy is, at bot-
tom). Without so much as a “hint in any of Congress’ pro-
nouncements that such individuals should be disfavored,” du
Pont, 32 F.3d at 597 (quoting NBW, 826 F. Supp. at 1463), it
would be positively wanton for a court to construe the asset
requirement so broadly as to destroy their otherwise valid
claims.
Even if we assumx for the sake of argument that the asset
requirement of § 1823(e) is so undemanding that § 1823(e) is
a defense to any claim that would diminish the FDIC’s inter-
est in any asset that it has acquired from a failed bank, in-
cluding an asset other than a loan, Murphy’s claims would
still survive. The FDIC does not point to an interest in any
specific asset of any type that would be diminished by Mur-
phy’s claims. Indeed, the FDIC does not even respond di-
rectly to Murphy’s assertion that its interest in no specific as-
set would be diminished, preferring instead to argue only that
other courts have applied the federal common law D’Oench
App. C7
doctrine to bar claims that would not diminish its interest in a
specific asset. That response not only fails to speak to the
proper interpretation of the asset requirement of § 1823(e), it
amounts to a near concession that the statute does not bar
Murphy’s claims and that if the FDIC is to find any refuge it
must be in federal common law.
In a footnote to its brief the FDIC does observe that its
“recovery from the loan transactions would clearly be dimin-
ished by any liabilities arising out of the same transactions.”
That statement could charitably be read implicitly to argue
that the loans that Southeast made to Orchid are the specific
assets in which the FDIC’s interest would be diminished by
Murphy’s claims. If that is the FDIC’s argument, however,
then we find it singularly unconvincing. The value of the
loans themselves would be diminished not at all by Murphy’s
claims. The FDIC may collect those loans or execute upon
the property securing them to the same extent regardless
whether Murphy prevails upon his damage claims. Only the
overall value of the bankrupt’s estate, not the receiver’s inter-
est in any specific asset, would be diminished if Murphy were
to prevail.
Because the FDIC has failed to demonstrate that any spe-
cific asset — let alone a specific asset “which in the ordinary
course of business would be recorded and approved by the
bank’s loan committee or board of directors,” du Pont, 32
F.3d at 597--would be diminished were Murphy to succeed,
we reverse the judgment of the district court (which did not
discuss the specific asset requirement in holding that §
1823(e) bars Murphy’s claims). Although the FDIC does not
rely separately upon § 1821(d)(9)(A), the statutory cousin of
§ 1823(e), we note also that that section simply “incorporates
by reference the requirements of § 1823(e),” including the
asset requirement, du Pont, 32 F.3d at 597, and therefore can
not provide an independent ground for judgment in favor of
the FDIC.
B. Federal common law: herein of D’Oench, Duhme &
App. C8
Co.
The D'Oench case involved a securities dealer who had
sold certain bonds to a bank insured by the FDIC. The issuer
later defaulted on the bonds. In order to allow the bank to
avoid carrying past due bonds on its books, the securities
dealer executed unconditional notes in the amount of the
bonds, pursuant (the dealer alleged) to a secret side agreement
that the bank would not call the notes for payment. When the
bank failed, however, the FDIC was appointed receiver and it
demanded payment of the notes. The Supreme Court held
that to allow the securities dealer to rely upon the secret
agreement as a defense to payment of its note would violate
the policy behind the Federal Reserve Act, viz. “to protect
[the FDIC}, and the public funds which it administers, against
misrepresentations as to the securities or other assets in the
portfolios of the banks which [the FDIC] insures.” 315 U.S.
at 457, 62 S. Ct. at 679.
Thus was born the federal common law doctrine that
courts have since expanded “beyond the paradigm in which a
debtor seeks to assert a defense to liability on a note held by
the FDIC” to bar a variety of both claims made and affirma-
tive defenses raised against the FDIC as receiver. See du
Pont, 32 F.3d at 597-99 (and cases cited therein). Indeed, in
the instant case the district court held that the D’Oench doc-
trine extends to (and therefore bars) Murphy’s substantive
claim that the bank by its actions assumed the liabilities of a
joint-venturer because that theory of liability contradicts the
written agreements between the bank and Orchid in the rec-
ords of the bank.
Although various circuits, including this one, have had
occasion to apply the common law D’Oench doctrine since
the passage of the FIRREA in 1989, Murphy argues that the
Supreme Court’s recent decision in O’Melveny & Myers now
makes clear that the common law doctrine was preempted by
that statute. To be sure, in O'Melveny & Myers the Supreme
Court does not flatly state that D'Oench has been preempted
App. C9
by the FIRREA, but it does set forth some more general
propositions that, we think, lead ineluctably to that conclu-
sion.
In O'Melveny & Myers the FDIC, as receiver of a Cali-
fornia savings bank, sued a law firm that had performed
services for the bank; it claimed that the firm had been negli-
gent and had breached its fiduciary duty by failing to uncover
the wrongdoing of certain officers of the bank. 512 U.S. at
----, 114 S. Ct. at 2052. The district court entered summary
judgment in favor of the law firm, apparently upon the ground
that under California law knowledge of the employees’ mis-
conduct is imputed to the employer — and thence to the FDIC
as receiver in the employer’s stead. /d. The FDIC argued
that the question whether to impute knowledge of a bank em-
ployee’s conduct to the FDIC is governed not by California
law but by federal common law. /d. The Supreme Court
unanimously rejected that contention, holding that the
FIRREA preempted the creation of federal common law on
this issue and that the rule of decision is therefore to be found
either in the federal statute itself or in state law. /d. at ---, 114
S. Ct. at 2054.
The Court began its discussion of preemption with the
proposition that it “would [not] adopt a court-made rule to
supplement federal statutory regulation that is comprehensive
and detailed; matters left unaddressed in such a scheme are
presumably left subject to the disposition provided by state
law.” dd. The Court then tumed to 12 USC. §
1821(d)(2)(A)(i), which, as amended by the FIRREA, pro-
vides that the FDIC “shall ... by operation of law, succeed to
all rights, titles, powers, and privileges of the insured deposi-
tory institution,” and explained that this provision “appears to
indicate that the FDIC as receiver steps into the shoes of the
failed S & L [so that] any defense good against the original
party is good against the receiver.” /d.
The Court went on to hold that the above-quoted provi-
sion is an exclusive grant of rights to the FDIC as receiver,
App. C10
which can be neither “supplemented [nor] modified by federal
common law.” /d. Here the Court cited four provisions of
the FIRREA--including § 1821(d)(9), which it described par-
enthetically as “excluding certain state-law claims against
FDIC based on oral agreements by the S & L” — that “specifi-
cally create special federal rules of decision regarding claims
by, and defenses against, the FDIC as receiver.... Inclusio
unius, exclusio alterius.” Id. The Court concluded this aspect
of the opinion with the broad observation:
It is hard to avoid the conclusion that § 1821(d\(2)Ai)
-places the FDIC in the shoes of the insolvent S & L, to
work out its claims under state law, except where some
provision in the extensive framework of FIRREA pro-
vides otherwise. To create additional “federal com-
mon-law” exceptions is not to “supplement” this
scheme, but to alter it.
Id.
Although the Court’s reasoning appears to leave no room
for a federal common law D’Oench doctrine, the FDIC here
emphasizes that the continuing vitality of D’Oench was not
directly before the Supreme Court and that the Court did not
specifically mention D’Oench in its opinion. That is hardly
compelling, however, when one considers that “{i]n cases of
doubt, the institutional role of the Supreme Court weighs in
favor of considering its rulings to be general rather than lim-
ited to the particular facts.” Cowin v. Bresler, 741 F.2d 410,
425 (D.C.Cir.1984), That point has particular force in this
instance, for while the vitality of D’Oench was not directly at
issue in O'Melveny & Myers the Court was specifically ad-
vised by both sides on brief and at oral argument that resolu-
tion of the issue before it could also affect the D’Oench doc-
trine. Moreover, although the opinion for the Court does not
specifically mention D’Oench, it does expressly include one
of the D’Oench-like statutory provisions (§ 1821(d)(9)) in the
list of special federal statutory rules of decision from which it
infers that “/i/nclusio unius, exclusio alterius.” O ‘Melveny &
App. Cll
Myers, 512 U.S. at ----, 114 S. Ct. at 2054. In so doing the
Supreme Court, we think, necessarily decided the D’Oench
question. To translate: the inclusion of § 1821(d)(9) in the
FIRREA implies the exclusion of overlapping federal com-
mon law defenses not specifically mentioned in the statute -
of which the D 'Oench doctrine is one.
The FDIC next contends that this interpretation is incon-
sistent with both the Supreme Court’s earlier decision in Lan-
gley v. FDIC, 484 U.S. 86, 108 S. Ct. 396, 98 L. Ed.2d 340
(1987), and the decisions of several lower courts (including
this one) holding that D 'Oench survives the enactment of the
FIRREA. The FDIC suggests that in Langley the Court sig-
nalled the continuing validity of the D’Oench doctrine be-
cause it relied upon the D’Oench case itself to inform its in-
terpretation of the term “agreement” in § 1823(e). Even if we
accepted that interpretation of Langley, however, it would
surely not dispose of the present issue because the Court de-
cided Langley before the Congress enacted the FIRREA. In
any event, in Langley itself the Court suggested, if anything,
that D’Oench was even then a dead letter:
That “agreement” in § 1823(e) covers more than prom-
ises to perform acts in the future is confirmed by exami-
nation of the leading case in the area prior to the enact-
ment of § 1823(e) in 1950 ... D’'Oench, Duhme & Co. v.
FDIC, 315 U.S. 447, 62 S. Ct. 676, 86 L. Ed. 956
(1942)...
Id. at 92, 108 S. Ct. at 401. Referring to D’Oench as the
leading case “prior to the enactment of § 1823(e) in 1950”
implies that D'Oench had lost its vitality as federal common
law with the enactment of the FDIA in 1950. At most the
Court in Langley left that question open.
As for the post-FIRREA decisions of the lower courts, the
FDIC is undeniably correct in its assertion that many courts,
including we, have either explicitly stated or implicitly as-
sumed that the federal common law remains alive and well
App. C12
alongside its statutory cousin. See, e.g. du Pont, 32 F.3d at
596-97; NBW, 826 F. Supp. at 1457-61 (and cases cited
therein). Most courts, however, have done so “without even
considering the preemption question.” NBW, 826 F. Supp. at
1458. More specifically, not one court has discussed the im-
pact of last year’s decision in O'Melveny & Myers upon the
continuing vitality of D'Oench. As the FDIC notes, our own
du Pont opinion issued after O'Melveny & Myers; but it was
briefed and argued before the Supreme Court decision issued,
and no party in du Pont brought the pendency of the issue in
O'Melveny & Myers to the a ention of the court. We can
therefore state with confidence that this court has not hereto-
fore decided what impact O'Melveny & Myers has upon the
D'Oench doctrine.
Finally, as a fallback the FDIC characterizes the
O'Melveny & Myers opinion as a prohibition only upon “the
creation of new federal common law,” thus suggesting that
the Supreme Court decision does not reach the question
whether already extant federal common law was preempted
by the enactment of the FIRREA. That interpretation is not
literally inconsistent with anything the Supreme Court says in
O'Melveny & Myers: The federal common law rule at issue
in that case appears to have been newly announced by the
court of appeals post-FIRREA, and at one point the Court
framed the issue before it as whether to “adopt a court-made
rule to supplement federal statutory regulation.” 512 U.S. at
----, 114S. Ct. at 2054.
The problem with such a narrow focus upon O'Melveny &
Myers is that it excludes from view all that the Supreme Court
has said before about the impact of comprehensive new leg-
islation upon existing federal common law. Although federal
common law is sometimes a “necessary expedient,” Milwau-
kee v. Illinois, 451 U.S. 304, 314-15, 101 S. Ct. 1784,
1791-92, 68 L.Ed.2d 1:4 (1981), the Court has made clear
that
App. C13
when Congress addresses a question previously gov-
erned by a decision rested on federal common law the
need for such an unusual exercise of law-making by fed-
eral courts disappears.... [The Court’s] commitment to
the separation of powers is too fundamental to continue
to rely on federal common law ... when Congress has
addressed the problem.
By stating that Ҥ 1821(d)(2)(A)(i) places the FDIC in the
shoes of the insolvent S & L, to work out its claims under
state law, except where some provision in the extensive
framework of FIRREA provides otherwise,” O'Melveny &
Myers, 512 U.S. at ----, 114 S. Ct. at 2054, the Supreme Court
appears to have concluded that the Congress in the FIRREA
did indeed address the question previously governed by
D’Oench. It follows that the need for a body of federal com-
mon law under the rubric of D’Oench has now “disappeared”
and that the district court erred in holding that Murphy’s
claims are barred under D ‘Oench.
C. The procedural claims
In count 1 of his complaint Murphy seeks a declaratory
judgment that the FDIC is required by statute to establish an
ADR procedure and to offer Murphy the option of resolving
his claim through that procedure; in count 2, he seeks a writ
of mandamus compelling that result. The district court
granted summary judgment in favor of the FDIC on both
counts.
The FIRREA does seem to require the FDIC either to es-
tablish an ADR process or to explain why such a process is
not appropriate for resolying any claims. 12 U.S.C. §
1821(d)(7)(B)\(i) (“The [FDIC] shall also establish such alter-
native dispute resolution processes as may be appropriate for
the resolution of claims”). The FDIC appears, however, to
have initiated an ADR program since Murphy raised his dis-
pute with the agency. See Resolution of the Board of Direc-
tors of the FDIC Concerning the Implementation of ADR
App. C14
(Dec. 20, 1994). Therefore, Murphy’s request that we order
the FDIC to take that step appears to be moot.
As for Murphy’s request for an order compelling the
FDIC to direct his case to an ADR process, we see that the
Statute gives the agency the discretion to decide whether to
refer any particular case to ADR. 12 USC. §
1821(d)(7)(B)(iii) (“all parties, including ... the [FDIC], must
agree to the use of [an ADR] process in a particular case”).
Consequently, we decline Murphy’s invitation to compel such
action.
Ill. CONCLUSION
For the foregoing reasons, we affirm the district court’s
grant of summary judgment in favor of the FDIC on counts |
and 2 and reverse the district court’s grant of summary judg-
ment on counts 3 through 9. The latter claims are remanded
to the district court for further proceedings consistent with
this opinion.
So ordered.
App. DI
APPENDIX D
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
BRUCE G. MURPHY,
|
|
Plaintiff, |
|
v. | Civil Action No. 92-01924
| (CRR)
FEDERAL DEPOSIT |
INSURANCE | FILED
CORPORATION, |
| Aug 21 1996
Defendant. |
Nancy Mayer-Whittington, Clerk
U.S. DISTRICT COURT
ORDER
On August 7, 1996, the parties appeared before the Court,
by telephone, for a status conference in the above-captioned
litigation. At that time, the Court held a colloquy with the
parties regarding the location of the plaintiff and the wit-
nesses, as well as the prior location of the depository institu-
tion, Southeast Bank, N.A. The plaintiff and the vast majority
of the fact witnesses reside in the Southern District of Florida.
The failed real estate development that is the subject of this
dispute is located in the Southern District of Florida. Prior to
its failure, Southeast Bank, N.A. was located in Miami. Ad-
ditionally, the plaintiff asserts a number of Florida state law
claims in his Amended Complaint. After hearing argument
from the parties concerning the transfer of this case to the
United States District Court for the Southern District of Flor-
ida, the Court determined that in the interest of justice and for
the convenience of the parties and witnesses, the Court shall
App. D2
transfer this case to the Southern District of Florida. Ac-
cordingly it is, by the Court, this 20th day of August, 1996,
ORDERED that the above-captioned case shall be trans-
ferred to the United States District Court for the Southern
District of Florida, pursuant to 28 U.S.C. § 1404(a), where
venue is appropriate pursuant to 12 U.S.C. § 1821(d)(6)(A).
/S/
CHARLES R. RICHEY
UNITED STATES DISTRICT JUDGE
App. El
APPENDIX
UNITED STATES DISTRICT COURT
THE SOUTHERN DISTRICT OF FLORIDA
CASE NO. 96-2614-CIV-MOORE
Magistrate Judge Turnoff
BRUCE G. MURPHY, )
Plaintiff, )
v. )
) -QRRER_
FEDERAL DEPOSIT INSURANCE ) FILE OBY[SR/DC
CORPORATION, ) May 11 1998
as Receiver for Southeast Bank, N.A., )
Defendant | Sen
) S.D. OF FLA. - MIAMI
THIS CAUSE comes before the Court upon Defendant
FEDERAL DEPOSIT INSURANCE CORPORATION’s
(“FDIC”) Motion to Substitute Party Defendant, filed May 7,
1998. After due consideration, it is hereby:
ORDERED that Defendant’s Motion is GRANTED, and
that Jeffrey H. Beck, as Successor Agent for Southeast Bank,
N.A. (“SEBNA”), is substituted as the party defendant in this
lawsuit, in the place and stead of the FDIC, which was previ-
ously the Receiver of SEBNA.
Done and Ordered, in chambers, Miami, Florida, this | 1th
day of May, 1998.
/S/
K. MICHAEL MOORE
UNITED STATES DISTRICT JUDGE
App. Fl
APPENDIX F
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
Case No. 96-2614-CIV-MOORE
BRUCE G. MURPHY, | pet te se
JUL 27 1998
Plaintiff,
CARLOS JUENKE
CLERK U.S. CT.
vs. ORDER $.D. OF FLA - MIA
JEFFREY H. BECK, as Successor Agent for the
Federal Deposit Insurance Corporation as Receiver -
for Southeast Bank, N.A..,
Defendant.
THIS CAUSE came before the Court upon Defendant”s
Motion to Dismiss (filed June 14, 1996 in United States Dis-
trict Court for the District of Columbia). :
UPON CONSIDERATION of the motion, responses, the
pertinent portions of the record, and being otherwise fully ad-
vised in the premises, the Court enters the following Order.
BACKGROUND
In August 1989, Plaintiff Bruce Murphy (“Murphy”) -in-
vested $515,672.37 to purchase a limited partnership interest
in Orchid Island Associates Limited Partnership (“Orchid”).
App. F2
Orchid was formed to develop the Orchid Island Golf and
Beach Club Project (the “Project”) for which Southeast Bank
(“Southeast”) was the lender. Pursuant to various loan
agreements, Southeast loaned Orchid approximately $50 mil-
lion dollars between 1988 and 1991. Orchid eventually de-
faulted on its loans and Southeast foreclosed on the property.
Southeast itself was declared insolvent on September 19,
1991 and placed in Federal Deposit Insurance Corporation
(“FDIC”) receivership. On May 11, 1998, this Court permit-
ted Jeffrey Beck (“Beck”), as Successor Agent to the FDIC as
Receiver for Southeast to be substituted as the party defen-
dant in this action.
In this action, Murphy alleges that Southeast, by its ac-
tions in connection with the Project, was a joint venturer or de
facto partner with Orchid and that Southeast controlled the
project. Murphy alleges that Southeast’s actions caused the
loss of his investment. Murphy filed this action in August
1992 before the United States District Court for the District of
Columbia alleging breach of fiduciary duty, breach of von-
tract, accounting deficiencies, fraud, negligent misrepresenta-
tion and securities violations. The FDIC moved to dismiss
the complaint on the grounds that Murphy's claims were
barred by the doctrine of D’Oench, Duhme & Company v.
FDIC, 315 U.S. 447 (1942), and, more specifically, that Mur-
phy could not sue Southeast under a joint venture theory be-
cause all written documentation on the relationship between
Orchid and Southeast explicitly rejected a joint venture rela-
tionship. On August 10, 1993, the United States District
Court for the District of Columbia granted the FDIC's Motion
to Dismiss. Murphy v. FDIC, 829 F. Supp. 3 (D.D.C. 1993).
Citing the D’Oench doctrine, the court held that Murphy
could not assert a claim against the FDIC based on the theory
that Southeast was a joint venturer in the Project because
there was no written joint venture agreement. On appeal, the
Court of Appeals for the D.C. Circuit reversed the majority of
the district court's decision, holding that the D’Oench doctrine
App. F3
was inapplicable. Murphy v. FDIC, 63 F.3d 34 (D.C. Ci
od (D.C. Cir.
. On May 29, 1996, subsequent to the D.C. Circuit’s deci-
sion, Murphy filed an Amended Complaint seeking declara-
tory relief (Count I), mandamus (Count II)' and alleging a
failure to register securities (Count III), unlawful offer and
sale of securities (Count IV), breach of fiduciary duty (Count
V), breach of contract (Count VI), accounting irregularities
(Count Vil), fraud (Count VIII), RICO violations (Count IX),
negligent misrepresentation (Count X) and negligence (Count
XI). ) Beck once again moves to dismiss the entire complaint,
arguing the loan documents explicitly refute the existence of a
joint venture agreement, or in the alternative, on various sub-
stantive grounds.
DISCUSSION
I. Motion to Dismiss Standard
A motion to dismiss for failure to state a claim merely
tests the sufficiency of the complaint; it does not decide the
merits of the case. Milburn v. United States, 734 F.2d 762
765 (1th Cir. 1984). On a motion to dismiss, the Court notes
that it must construe the complaint in the light most favorable
to the plaintiff and accept the factual allegations as true. SEC
y. ESM Group, Inc., 835 F.2d 270, 272 (1 lth Cir. 1988), cert.
denied sub nom. Peat Marwick Main & Co. v. Tew, 486 U.S.
1055 (1988). A court should not grant a motion to dismiss
“unless it appears beyond doubt that the plaintiff can prove no
I ‘
FDIC was granted summary judgment on Counts | and II and thus these
— Murphy. FDIC, 61 F.3d 34 (D.C.
* By Order dated August 20, 1996, United States District Judge Charles R.
Richey wensforred tis case to the Southam Diswict of Fieside Judge
Richey found that the plaintiff and vast majority of witnesses resided in
this district. In addition, the failed land project is located in this district
and Southeast Bank was originally located in Miami. Upon transfer, the
case was assigned to this Court.
App. F4
set of facts in support of his claim which would entitle him to
relief.” Conley v. Gibson. 355 U.S. 41, 45-46 (1957) (cita-
tions omitted); South Flori ist. Vv.
Montaivo, 84 F.3d 402, 406 (11th Cir. 1996). Nonetheless, to
withstand a motion to dismiss, it is axiomatic that the com-
plaint must allege facts sufficiently setting forth the essential
elements of a cause of action.
Il. Existence of a Joint Venture
Beck argues that because the alleged joint venture be-
tween Southeast and Orchid is evidenced by actions taken by
Southeast, rather than by any written joint venture agreement,
this action should be dismissed because the loan documents
expressly disclaim the existence a joint venture. In this case,
there are no documents creating 2 joint venture between
Southeast and Orchid. Furthermore, the loan agreements at
issue in this case expressly reject a joint venture between
Southeast and Orchid. The first three loan agreements, dated
August 30, 1998, April 13, 1989 and January 31, 1990, ex-
plicitly provide that “[t]he Lender [Southeast] is a lender only
and shall not be considered a shareholder, joint venturer or
partner of the Borrower [Orchid].” In addition, the final loan
agreement, dated March 21, 1991, states:
At no time did the Lender engage in or attempt to en-
gage in or in any way involve itself in active manage-
ment marketing, operation or control of the Project and
has not, at any time, acted as a joint venturer in or a
partner with the Debtor parties in connection with the
Project. In the future. at no time shall Lender be con:
s as havin a joint v
with the Debtor Parties in connection with = Project
(emphasis added).
The plain language of the agreements is clear: No joint
venture existed between Southeast and Orchid. See also
FDIC v. Key Biscayne Develop. Assoc., 858 F.2d 670 (11th
Cir. 1988) (observing that construction of a contract is a mat-
App. F5
ter for the court to decide and expressly finding that agree-
ments containing the language “It is understood and agreed
that [Continental]. . . by issuing this loan or by taking any ac-
tion pursuant hereto shall not be deemed a partner or joint
venturer . . .” was clear evidence that the loan agreements did
not create a joint venture).
Murphy does not dispute that the agreements contain ex-
press disclaimer language. Murphy argues, however, that he
was not a party to any of the agreements containing the dis-
claimers and that “Florida law clearly permits a third party
such as Murphy to establish the existence of a joint venture or
de facto partnership relationship notwithstanding a purported
disclaimer of a joint venture between the alleged joint ventur-
ers.” Murphy’s argument is flawed for two reasons: First,
Murphy is not a third party who was “not a party to the dis-
claimer agreement.” Murphy, by virtue of his investment,
was a limited partner in Orchid. Orchid is the signatory on
each of the loan documents. Thus, as a limited partner in Or-
chid, Murphy is a party to, and bound by, the agreements. In
addition, even were Murphy correct in arguing he was not a
party to the agreements, there is still no evidence of a joint
venture. Under Florida law, courts generally look at five
elements to determine whether a joint venture exists: (1)
community of interest in the performance of a common pur-
pose; (2) joint control or right of control; (3) joint proprietary
interest in the subject matter; (4) right to share in the profits;
and (5) a duty to share in the losses. Kislak v. Kreedian, 95
So. 2d 510 (Fla. 1957). A review of the loan agreements in
this case fails to establish the existence of a joint venture,
particularly because there is no evidence that Southeast had a
right to share in any profits or any duty to share in any losses.
The Court further notes that the D’Oench doctrine pre-
vents Murphy from stating a claim. As recognized by the
United States District Court for the District of Columbia in
ruling on the original motion to dismiss, Murphy’s claim “is
not cognizable under the law absent a written document. . .
App. F6
and transacttoms-that do not appear on the bank’s books are
not cognizable in a court of law.” Murphy, 829 F. Supp. at 5-
6. The’District of Columbia Court of Appeals reversed, citing
the Supreme Court decision in G Melveny & Myers v. FDIC,
512 U.S. 79 (1994) and expressly stating that the federal
common law D’Oench doctrine has been displaced by federal
statute. Murphy, 61 F. 3d at 36. In direct contrast to the D.C.
Circuit, however, the Eleventh Circuit still adheres to the
D'Oench doctrine. In Motorcity of Jacksonville Ltd. v.
Southeast Bank, 83 F.3d 1317 (11th Cir. 1996), the Eleventh
Circuit specifically "disagree[d] with Murphy’s reliance on
O’Melveny” and held that the federal common law D’Oench
doctrine was not preempted. Id. at 1333-34. Accordingly,
because the D’Oench doctrine is still valid in this circuit, the
Court finds the district court's reasoning in Murphy persua-
sive that, in addition to the reasons stated above, the D’Oench
doctrine prevents Murphy from stating a valid claim.
CONCLUSION
Based on the foregoing, it is ORDERED AND
ADJUDGED that Beck's Motion to Dismiss is GRANTED.
The Clerk of Court shall mark this case CLOSED. All mo-
tions not otherwise ruled upon are DENIED AS MOOT.
DONE AND ORDERED in Chambers at Miami, Florida,
this 24” day of July, 1998.
/S/
K. MICHAEL MOORE
UNITED STATES DISTRICT JUDGE
Cc: Hilare Bass, Esq.
John F. Bloss, Esq.
App. G1
APPENDIX G
UNITED STATES CODE ANNOTATED
TITLE 12. BANKS AND BANKING
CHAPTER 16—-FEDERAL DEPOSIT INSURANCE
CORPORATION
[EXCERPT]
Copr. © West Group 2000. No claim to orig. U.S.
Govt. Works
Current through P.L. 106-180, approved 3-17-2000
§ 1823. Corporation monies
*** *
(e) Agreements against interests of Corporation
(1) In general
No agreement which tends to diminish or defeat the in-
terest of the Corporation in any asset acquired by it under this
section or section 1821 of this title, either as security for a
loan or by purchase or as receiver of any insured depository
institution, shall be valid against the Corporation unless such
agreement--
(A) is in writing,
(B) was executed by the depository institution and any
person claiming an adverse interest thereunder, including the
obligor, contemporaneously with the acquisition of the asset
by the depository institution,
© was approved by the board of directors of the de-
pository institution or its loan committee, which approval
shall be reflected in the minutes of said board or committee
and
App. G2
(D) has been, continuously, from the time of its execu-
tion, an official record of the depository institution.
(2) Public deposits
An agreement to provide for the lawful collateralization
of deposits of a Federal, State, or local governmental entity or
of any depositor referred to in section 1821(a)(2) of this title
shall not be deemed to be invalid pursuant to paragraph (1 )(B)
solely because such agreement was not executed contempora-
neously with the acquisition of the collateral or with any
changes in the collateral made in accordance with such
agreement.
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App. H1
APPENDIX H
UNITED STATES CODE ANNOTATED
TITLE 12. BANKS AND BANKING
CHAPTER 16-FEDERAL DEPOSIT INSURANCE
CORPORATION
{EXCERPT}
*“* * *
(d) Powers and duties of Corporation as conservator or re-
ceiver
*“** *
(9) Agreement as basis of claim
(A) Requirements
Except as provided in subparagraph (B), any agreement
which does not meet the requirements set forth in section
1823(e) of this title shall not form the basis of, or substan-
tially comprise, a claim against the receiver or the Corpora-
tion.
(B) Exception to contemporaneous execution require-
ment
Notwithstanding section 1823(e)(2) of this title, any
agreement relating to an extension of credit between a Federal
home loan bank or Federal Reserve bank and any insured de-
pository institution which was executed before the extension
of credit by such bank to such institution shall be treated as
having been executed contemporaneously with such extension
of credit for purposes of subparagraph (A).
see *
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